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Combination of Analysis as Part of Forex Trading Strategies

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The fundamental principle behind the formation of forex trading strategies is based on information, development of skills and common sense. Before we enter the world of forex trading, it is best to gather information on the workings of a foreign currency market exchange. There has to be presence of mind to know when the market is ready for buying and selling and when the pips or the smallest price changes are flowing in connection with a given exchange rate.

Like the equity markets, fundamental analysis and technical analysis are the two common areas that make up forex trading strategies in the foreign exchange market. Technical analysis is one strategy that almost all individual forex traders use. The technical analysts will only analyze the price trends. The only actual difference between technical analysis in the forex market and the technical analysis in the equities’ market is the time period that is involved as the forex markets are open throughout the day while the equity markets are not.

Fundamental analysis is used as a part of forex trading strategies to predict the trends on a long term basis. By reading some reports on the Purchasing Managers Index (PMI) or the Consumer Price Index (CPI) and checking the commentary on these reports, fundamental analysts get a good understanding of long term forex market trends. Even the short term traders will be able to benefit from certain extra-ordinary events and happenings that are covered and discussed in these reports.

When pursuing a fundamental forex strategy, it is better to keep a diary handy to note down all major economic events and the dates of the reports when they are released.