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Online forex trading strategies are premeditated plans of action conceived to make profits in the foreign exchange market. There are two basic strategies involved in forex trading: technical and fundamental analyses.
Technical analysis is based on the premise that history repeats itself. It attempts to predict the movement of currency prices by analyzing previous price trends and volumes, all based on previous activity. Technical analyses rely solely on the use of graphs and charts to determine market trends. Some of the charting methods include: moving averages, strength index, Japanese candle stick, moving average convergence or divergence (MACD), simple moving average and so on. Some traders base their trading patterns on technical analysis alone and that is what works for them. Even though it looks very safe and secure, a trading pattern that relies on technical analysis alone might be unsafe because the world itself is dynamic.
In fundamental analysis, a number of variables are considered. Natural disasters, change in policies of banks, change in national leadership, effect of terrorist attacks and so on. All these and many more do affect the value of currency. Some of these things do not happen regularly so the technical analyst is not prepared for events like this; for instance a country where a change in government occurs every four years. It might be very cumbersome to refer to a chart of market trends four years ago. Fundamental analysis takes into consideration a number of factors: inflation, political and economic policies and so on. Traders use this analysis to determine their points of entry and exit.
Factors that affect currency prices in a nation include: the effect of supply and demand, the balance of trade (international and local) the country has been involved in if there are more imports than exports. This means more money is leaving than is coming in, which could have an adverse effect on the currency value and the amount of investments in foreign countries. Some other variables that may be made use of are Consumer Price Index (CPI), Gross Domestic Product (GDP), durable goods order and so on. A combination of both strategies (technical and fundamental) will help to get the best out of online forex trading and help achieve the focus of your investment plan.