There are two types of forex market analysis: fundamental analysis, which considers economic, social and political impacts and how they affect the currency markets, and technical analysis which uses charts to spot trends and patterns in the movement of prices.

So which one is better? If you check out forums and websites you can find many traders vehemently supporting one or the other. Those who like to rely on charts will advise you that the only way to make money with currency trading is to identify trends and jump onto them as soon as possible.

At the same time the advocates of fundamental analysis will argue that it is the economic factors that drive the changes in currency prices and this is doubtlessly true, at least most of the time. From that position they will reason that any patterns you might observe on a chart are nothing more than coincidental.

But logically this does not certainly follow. Even though economic changes have a huge impact on the forex markets, it may still be possible to identify patterns in the way that the markets react after an news release or in times when there are no major announcements.

If on the other hand you bet totally on your charts, you are likely to be caught out when a major financial event such as an interest rate change is suddenly released. If you were not following the market news and left a trade open at the wrong moment, that could result in a disaster.

So the bottom line is that there are economic events behind the larger scale rises and falls in the market, but there are also common formations that can be recognized in the short term. Finding these formations and trends, while keeping one eye on the economic and political news, is the best way to predict future price movements. And predicting future price movements, of course, is the way to earn money with currency trading.

Foreign exchange market movements are a little like elastic that can stretch in one way or another and then fall back, although not always to its starting position. The fundamentals are the forces that cause it to stretch. Technical analysis forecasts how far it will go in each direction before reversing.

So when you want to profit from forex trading it is better not to allow your attention to become fixed on either one. You must learn to balance the use of both types of currency market analysis to make consistent profits.
The best tool to find out whether an analysis is correct or not is using forex trading signals. If you can find a good forex signal provider, whose accurate forex signals are in coherence with the analysis, then you can rely on what you read.

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