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February 17, 2014

The Difference between Technical and Fundamental Forex Strategies

Technical and Fundamental Forex Strategies

This article looks at the differences between technical and fundamental forex strategies.

Some traders on the market are going to be technical traders and other traders on the market are going to be fundamental traders.  When you choose to be one of the others you should consider the different forex strategies that you can use.  There are a lot of people who assume that the forex strategies that technical and fundamental traders use are different.  You should determine if this is the case and what is different about the strategies that these traders will be using.

The Different Forex Strategies

The common idea is that the forex strategies that the technical and fundamental traders use are different.  This is not actually the case because the strategies will be the same, but there will be certain differences.  The strategy that the technical trader uses can be used by the fundamental trader.  To do this you will need to consider what exactly is different about the forex strategies that these traders use.

The Short-Term Strategies

There is a misconception that states that all short-term trading is done with the use of technical analysis.  While technical analysis does play a large role in most short-term strategies it is possible to use fundamental analysis as well.  You should consider how this can be done if you are looking at being a short-term trader.

The short-term technical strategies will make use of the hour charts and shorter timeframes.  When you use these strategies with fundamental analysis you are going to be looking at the low impact news.  The low impact news will have a short-term impact on the market which is what you need for this trading timeframe.

The Medium-Term Trading Strategies

The most commonly used medium-term trading strategy is swing trading.  When you use swing trading you are going to be looking at the turns in the market and trading on the trends that follow.  It is possible to find these turns on the market with technical trading much more easily than with fundamental trading.

If you are going to use fundamental analysis with swing trading you will have to combine this is technical analysis.  When you do this you are going to be looking for the consolidation that comes before a reaction to the forex news.  You will not be looking for the reaction as much as this consolidation.

The Long-Term Strategies

The long-term strategies differ to the short and medium-term strategies because they are the ones that people assume you are going to be using fundamental analysis with.  When you trade on the long-term you are going to be looking for long-term trends on the market.  These trends are often the reaction to high impact forex news.  The high impact news will cause a long-term reaction because they will affect the fundamentals of the currency.

It is possible to use only technical analysis to trade on the long-term.  To do this you will need to look at the long-term trading charts which are the week and month charts.  On these charts you should try and find the overall directional movement of the market.  Once you have done this you need to look at the shorter term charts to find your entry levels.

 

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