Basic Analysis vs Technology in Forex Trading

There are two main types of basic analysis methods for forex transactions: fundamental analysis and technical analysis. Fundamental analysis mainly analyzes the factors driving exchange rate changes, while technical analysis mainly analyzes the behavior of exchange rate changes themselves.

Fundamental Analysis

Fundamental analysis mainly analyzes the factors that affect the supply and demand of the forex market, such as economy, society, and politics. In other words, you need to check which country's economic situation is better and which country's economic situation is worse. The main idea of fundamental analysis is that if a country's economy is doing well, its currency is also bound to be strong. This is because the better the economy that has passed, the more new other countries are to their currencies.

For example, the US economy continues to perform well. With the prosperity of the economy, if interest rates are raised to curb excessive inflation, the US dollar will rise and its trend will be strong. There are two reasons for this: firstly, the US economy is good, and secondly, the US interest rates are high. The former is like a company's high earnings per share, while the latter is like a company's high dividend. Simply put, this is the popular principle of fundamental analysis.

Technical Analysis

Technical analysis, also known as technical analysis, mainly studies the movement of prices. Simply put, technical analysis is equivalent to studying price charts. The basic meaning is that we can infer future price movements by examining historical price movements. By reviewing the price list, you can confirm trends and patterns, which can provide us with trading opportunities.

The most important aspect in technical analysis is trends! Many, many, many people have once said, "Trends are your friends." The reason for saying this is because once you catch a trend, you will quickly make a big profit. Technical analysis can help you confirm trends as they form, thus providing you with excellent trading opportunities.

Which Method is Better

When you have been a trader for many years, you will find that both analytical methods have many strong supporters. Traders who lean towards technical analysis and those who lean towards fundamental analysis. You will find that some people argue that fundamentals are driving the market, while the patterns found on the icons are just coincidences, while another group of people argue that technical analysis should be given attention because prices absorb all information, and many graphics can indeed help us predict market changes. Don't be confused by extremists on both sides! Actually, no one is better than the other. What I want to tell you is that you need to know a little bit about both.

It is important to note that both technical analysis and manual trading strategies can be easily found online. However, traders should be aware that there is no 'holy grail' in the trading system. If the trading system is perfect, then no one will share this money making machine.

There is no such thing as the best forex analysis method. Technical analysis or fundamental analysis can be considered the most feasible choice based on the way traders obtain information and time. For short-term forex traders, obtaining economic data information is not timely enough, but being able to obtain quotes in real-time, technical analysis may be the preferred method.

For long-term traders who can access real-time economic data and news coverage, fundamental analysis may be the optimal choice. It is recommended that forex traders try all analytical methods to determine which method is effective for them in any situation.

【 EBC Platform Risk Reminder and Disclaimer 】: There are risks in the market, and investment needs to be cautious. This article does not constitute investment advice.