Forex trading can often be complex and require quite a bit of analysis to determine where the market is headed. There are two types of analysis that are important to your trading strategy, and they both have their popularity within the forex market and among active fx traders. Technical Analysis, is just that, its about getting to more logical side of the equation with mathematical factors like technical indicators, price charts or candlesticks. Fundamental analysis on the other hand is where a particular trader will closely watch economic factors like world politics or other financial markets, even gold and oil play a part in predicting where the market will go if  your a fundamental trader.

I don’t necessarily believe either one of these to be more important than the other, and they should both be closely watched if you want to be successful at forex trading. Many traders will latch onto just one analysis method and may find that it works for them. If that’s the case, then they should keep using it. Technical analysis is more inline with trading stocks, so it tends to be the winner if you were to compare the two. The other reason is that fundamentals can tend to be a bit virtual, and their not easily jotted down on a piece of paper and followed like a road map like technical indicators would be.

Also, fundamental analysis requires a lot of reading and up to the minute information because politics or financial can change at a moments notice. If your not an avid reader or plugged into the internet 24/7 your likely to miss key pieces of financial information that could directly affect your fundamental forex trading that evening or the next day. Technical analysis can be historical and not necessarily what is going on in the here and now, so many fundamental traders will argue that the charts are historical and therefore are incapable of predicting whats next. To be certain, major financial reports or national events, or even a one line blurb from the FED can quickly change the direction of the forex market and send the dollar into retreat or straight through the roof.

Pricing in the forex market has a certain amount of elasticity to it and even though a market is moving one direction for an extended period, it often returns to either its original price or just slightly less. Even though its fundamental information that make the market move, its the technical analysis that takes that snapshot of the time line to determine with regular clarity exactly where that same market will go when it reacts in the same way next time. So the best way to build a successful forex trading portfolio is to utilize the technical tools like charts and graphs and time lines and use the fundamental factors at the same time to develop a well rounded and profitable trading strategy. To be successful, you must be able to use both types of analysis in your trading techniques.