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The Forex market, also known as foreign exchange or FX market, has two basic strategies – Technical analysis and Fundamental analysis. The strategy used in the forex market is similar to the strategies used in other financial markets. The most commonly used strategy amongst Forex traders is Technical analysis. However for becoming a successful currency trader, it is important for traders to know the working of technical as well as fundamental strategies.

Fundamental Analysis:

Fundamental Analysis is very complex in nature and used by traders who usually trade in long-term trends. Fundamental analysis is done by analyzing some specific factors of a country which include Purchasing Managers Index, Retail sales, Consumer Price Index, Durable goods and Non-farm payrolls to name a few. Traders using the fundamental strategy always keep their eyes open to detect the changes in the fundamental factors of a country. Commercial banks and investment banks who are considered as big players in Forex trading organize special meetings to discuss inflation, interest rates and other factors that can influence the rise and fall of a currency rate.

Traders also keep a keen eye on the statements made by governments that can make the currency market more volatile. Traders generally follow meetings like Humphrey Hawkins Hearings and Open Market Committee. Through news and examinations Forex traders can predict the currency rate for long-term trends.

Technical Analysis:

Technical Analysis refers to the price trends in the Forex market. The most common types of technical analysis to determine the currency pairs prices are: Fibonacci studies, support and resistance levels, Pivot points and Parabolic SAR. Most Forex market technical analysts combine technical analysis methods like Fibonacci and Elliott to come up with sure shot predictions.

Selecting the best strategy and perfecting it over time is the sign of a successful Forex trader. Generally, Forex trading experts advise traders to use the combination of technical and fundamental strategies for accurate prediction. All strategies works best for forex traders who go with the flow of the trends and not against them. Following successful trends increases the chance of profits.

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