Forex trading refers to trading in currencies from all around the world. Forex market is open 24 hours a day, five days a week. There are hundreds of thousands of traders all over the world trading in various currencies. A number of different strategies are used by various traders to make money in this trading market.
Some of the traders prefer to use fundamental analysis whereas others prefer to use Forex technical analysis. As is the case with the stock market, the fundamental analysis refers to the strengths and weaknesses of a particular currency whereas technical analysis refers to the use of charts to arrive at trading decisions.
It is important to mention here that beginners generally really get a good understanding of technical analysis unless they have a very strong understanding of the fundamental part. In other words, technical analysis cannot exist without fundamental analysis as you need to know what exactly you are looking for to understand the signals.
In technical analysis, various charts show the prices of various currencies in the past to figure out a pattern in the rates to arrive at future rate. Most of the successful traders make use of fundamental as well as technical analysis to stay ahead in the game.
Forex trading is done in pairs and the most popular currency pair currently on the market is USD and EUR as a lot of trade takes place between US and Europe. Currency values fluctuate on a regular basis depending on the demand and supply as well as on the economic policies followed by various countries.
In simple terms, Forex technical analysis can be defined as a study of the past patterns. While it is true that past performance does some times help in predicting the future movement, it does not always work. In simple terms, technical analysis does not guarantee profits in Forex trading and therefore, you need to study the fundamental analysis as well as technical analysis to make money in forex trading.
In technical analysis, a number of graphs and charts are used by traders to figure out trends. There are a number of software programs available in a market that can help traders in doing technical analysis. Most of the Forex brokers also provide a trading platform to their users and some of these charts are also available as part of their system. There are also a number of other packages where various charts and graphs are readily available.
Overall, technical analysis in foreign currency trading is not a guarantee of success. Many traders are of the opinion that a trader needs to be knowledgeable about fundamentals of the currency market and should have the ability to read various technical charts to make money.
It is important to keep in mind that while Forex trading does have the potential to make you a lot of money in a short period of time, the potential for loss is also infinite. Therefore, you should learn everything you can about Forex trading before you begin. There are a number of resources available online that can help you in learning everything you want to learn about Forex trading.