Basically there are two types of trading analysis as you approach the Forex market.
1. Fundamental Analysis
2. Technical Analysis
As to which analysis is better is up for debate as proponents on both sides claim theirs is the best. To begin with, you have to know a little something from both types of analysis. So, let us talk about these two individually.
The strength of a country can be reflected and can be determined through fundamental analysis. Fundamental analysis has to do with the economic, political and social forces of the country that can affect the supply and demand.
In order to find out that the fundamental analysis is doing well, you have to look if the economy of the country is doing well too.
If the country's economy is doing well, you can be quite sure that the currency of that country is doing well just the same. The better the country's economy the better is the trust that other countries have for them as well.
This is the reason why the U.S. dollar is continuously gaining strength and power it is because United States is stable economically speaking.
As the economy of the United States increases in value so does the value of their money, and this is the basis of fundamental analysis.
Not only is the economic aspect what we are looking for in analyzing fundamentals, the social and the political forces of the country are examined as well.
Technical analysis talks about price movement. Whether the prices are going up or down it is in technical analysis where we will able to see it, these are called "charts".
A trader can look at the price movements from its history. And by this we can also identify to where the prices may be leading.
The trends and patterns of the prices' movement can be seen in the charts, this can help traders to decide and to see if it is a good time to trade.
In technical analysis you will learn that the most important thing to learn and follow are the trends. A lot of traders believe that the trend is their friend. The reason why traders believe that the trend is their friend is simply because this is where they make money, lots of money after learning and following these trends. If you know where the trend is you will be able to know where to trade.
At an early stage of trading business you will be able to learn where to look for the trend, and technical analysis can be able to help you find it and then trading will be profitable with these great opportunities.
By learning both fundamental and technical analyses a Forex trader can maximize their profits. While some prefer one system to another, the best traders use both.