There are two main types of analysis one can use trading in the Forex.
They are Fundamental analysis and Technical analysis. You should know a little about both types in spite of the fact that there has always been a debate which analysis is more preferable. It's necessary to examine the currency markets from aside and learn how news influences prices.
You should know and understand the daily Forex news and market analysis proposed by professional currency analysts. Soon you'll realize what big part fundamental news are playing in your everyday trading. Luckily, most Forex news and analysis are offered on the Internet free of charge. We'll name these sites.
Technical analysis
Technical analysis is equal to charts, or, in other words, it's the study of price movement. The thing is that anyone can look at historical price fluctuations, and according to them, predict at some point where the price will go. In the charts one can find trends and patterns which will help you find good trading options.
The most necessary thing in technical analysis is the trend! A lot of people know quite well that "The trend is your friend". You will more apparently succeed if you're able to find a trend and trade in the same direction, and Technical analysis can help you identify these trends as soon as possible. Then you'll get more beneficial trading opportunities.
Fundamental Analysis
With the help of Fundamental analysis you observe at the market through economic, social and political forces that influence supply and demand. To put it differently you look at whose economy is successful and whose is not. If someone's economy is doing well; their currency will also be doing well.
That happens because the more successful a country's economy is, the more other countries trust in this currency. For instance, as the U.S. interest rates are increasing, the value of the dollar is also increasing. So the U.S. dollar has been doing well as the U.S. economy is doing well. Later in this course you will learn which specific news events mostly influence currency prices.
For now it's enough to realize that the fundamental analysis of the Forex is a way of analyzing a currency through the strength of this country's economy.
