What's Next

Well now we have a basic understanding of how the FX market works and who the main players are, what next? You are now going to have to decide the best way to trade the market. The two most common approaches are that of fundamental analysis and technical analysis.

Fundamental analysis concentrates on the forces of supply and demand for a given security. This approach examines all the factors that determine the price of a security and the real value of that security. This is referred to as the intrinsic value. If the intrinsic value is below the market price then there is an opportunity to buy and if the market is above the intrinsic price then there is an opportunity to sell.

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Technical analysis is the study of market action, mainly through the use of charts and indicators to forecast the future price of a security. There are three main points that a technical analyst applies. A. Market action discounts everything. Regardless of what the fundamentals are saying, the price you see is the price you get. B. The price of a given security moves in trends. C. The historical trend of a security will tend to repeat.

Of all of the above things the most important of them is point A. The tools of the technical analyst are indicators, patterns and systems. These tools are applied to charts. Moving averages,support and resistance lines, envelopes, Bollinger bands and momentum are all examples of indicators.

There are many ways to skin a cat as the saying goes but fundamental and technical analysis are the two most popular ways of trading FX.

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