By Willie Reynolds
FOREX trading refers to an international, 24/7, over the
counter, exchange market where currencies of different nations
are bought and sold. Trading is always done in pairs assuming
the price of currency bought to go up and that sold to fall
down. It is the largest liquid financial market making it
impossible for any single investor to influence the prices of
There are two kinds of FOREX investing strategies:
Technical analysis is mostly undertaken by small and medium
A technical analysis considers factors that are actually
affecting the market rather than factors that can affect it.
Thus the price quoted reflects all the factors that have
influenced it. Only market generated facts and figures are
taken into account and factors like fear, hope, expectations
other changes are not considered. Thus the analysis is
based on these suppositions:
Price reflects all actual market movements. That means price
includes everything known to the market like supply and demand
of foreign exchange, political factors, trade agreements etc.
It is not concerned with what resulted in change rather deals
with actual changes. It works on the assumption that price can
take only one of the three directions:
It rest on those market patterns that have been identified
significant. That means those factors which are repetitive in
nature or will produce desired results.
History always repeats itself as human psychology changes
very slowly with time. That is market movements are
VARIOUS TECHNICAL INDICATORS ARE:
1. RELATIVE STRENGTH INDEX:
It takes into account the ratio of upward and downward
movements in index and expresses it in the range of zero to
Charts include various hills, slopes, curves that develop on a
chart over a time and reflect some major and minor changes in
pattern. Some of the chart formations include:
HEAD AND SHOULDERS
DOUBLE TOP AND BOTTOM
A gap represents area on a bar chart where no trading took
UPGAP: it is formed when the lowest price on a particular
is more than the highest price of previous day.
DOWNGAP: it is formed when highest price of a certain day is
less than the lowest price on previous day.
Various number theories are used in technical analysis like:
This indicates the overbought or/and undersold condition. It
uses a scale of zero to hundred percent.
It is the one where current economic, political, financial
situation of the country of currency is studied. A countrys
economical and political condition depends upon many factors
like the interest rate, unemployment level, exports and
imports, per capita income, percentage of population living
above and below the poverty line, inflation, trade relations
with other countries, tax policies etc.
A fundamental analyst studies and evaluates all these factors
before coming to any decision. Thus it helps in long tem
decision making and making profits in short term by extra
Some of the indicators that help in fundamental analysis
1. GROSS DOMESTIC PRODUCT:
It reflects total market value of all the goods and services
produced in a country during a given year.
2. RETAIL SALES:
This reflects total receipts by all the retail stores in a
3. CONSUMER PRICE INDEX:
It reflects change in prices of consumer goods.
4. BUSINESS CYCLE:
It reflects various phases through which a business passes.
These phases include:
5. MONETRY POLICY:
It controls the supply of money in an economy.
Trading successfully needs knowledge, time and understanding
a market. You cannot earn continuously in a Forex market due
its volatile nature. Thus as a trader you should try to
consider both technical and fundamental strategies of forex
trading and make decision based on market expectations and
trends. Try trading with money that you can afford to loose
without any regrets. Trade with logic and if you are not sure
quit and take rest for some time.
About The Author: Willie Reynolds maintains a site teaching
ins and outs of Forex investing. Visit his site at: