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Wednesday, April 7, 2010

Fundamental Analysis

Fundamental Analysis is a way of looking at what’s happening with the currency from an economic point of view, mainly. As mentioned before, economic news is normally scheduled to be released at pre arranged times, as shown on the Forex Calendar. These announcements often move price.
Fundamentalists mainly use this economic data to try and predict which currency will appreciate and which currency will depreciate in value. In simple terms, which currency is going to get stronger and which is likely to get weaker. For example, currencies tend to get stronger when interest rates increase. This is because this currency now attracts savers. These savers can be from anywhere in the world, generally. However, they need to change their money into the currency they wish to save in, where the highest interest rate is. This creates demand for that currency and pushes the value of that currency up. Basic principles of supply and demand.
Fundamental traders do tend to hold their trades for longer as they are looking at a currency gaining or losing strength due to economic conditions. They can hold trades for days/weeks or even months. They can also take short term position of just a few minutes. These tend to be News traders and this can be a highly risky strategy and not recommended for a new trader.
However, most traders visiting this site are Technical traders.


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