Page 4 - Module 4 - Trading_Ways_and_Means

Module 4 - Lesson 1 – Introduction to trading ways and means

1. introduction
Wouldn’t investing be easy if we knew the answers to these seemingly simple questions?
▪ What will prices be later today, tomorrow, next week, or next year?
▪ Which currency should I trade today?
▪ Should I buy today, or should I sell?
▪ Which way will the market be going the next few minutes?
▪ When is the best moment to enter a trade?

Alias, if you are doing this course in the hope to get all the answers to these questions, I’m afraid I
must disappoint you early – we unfortunately don’t have all the answers to all the questions.
However, if you are reading this guide with the hope that fundamental and technical analysis will
improve your investing, I have good news – it will! We can certainly help you on your way to become
a successful Forex trader.

2. two ways to trade
There are two basic approaches to analysing currency markets, fundamental analysis and technical
analysis.
▪ The fundamental analyst concentrates on the underlying cause of price movements
▪ The technical analyst studies the price movements themselves

Fundamental Analysis
Fundamental analysis focuses on the economic, social and political forces that drive supply and
demand. Fundamental analysts look at various macroeconomic indicators such as economic growth
rates, interest rates, inflation and unemployment. However, there is no single set of beliefs that guide
fundamental analysis. There are several theories as to how currencies should be valued.

Technical Analysis
Technical analysis focus on the study of price movements. Historical currency data is used to forecast
the direction of future prices. The premise of technical analysis is that all current market information
is already reflected in the price of that currency; therefore, studying price action is all that is required
to make informed trading decisions.

The primary tools of the technical analyst are charts. Charts are used to identify trends and patterns
in order to find profit opportunities. The most basic concept of technical analysis is that markets
tend to trend. Being able to identify trends in their earliest stage of development is the key to
technical analysis.

3. Technical Analysis or Fundamental analysis?
Most traders abide by technical analysis because it does not require hours of study. Technical
analysts can follow many currencies at one time. Fundamental analysts; however, tend to specialize
due to the overwhelming amount of data in the market.
Technical analysis works well because the currency market tends to develop strong trends. once
technical analysis is mastered, it can be applied with equal ease to any time frame or currency traded.
Best advice is to take both sciences into consideration when trading.

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