Technical and fundamental analysis have evolved from, and are perfect for, share markets, commodities, and related derivatives, but when applied to the Forex market they simply don't work that well.
The Forex market is entirely different from shares and commodities trading, and it exists for entirely different reasons. Speculators make up a tiny proportion of the Forex market. Retail traders like you and me represent just 4% of the market volume. Major hedge funds account for only 14%. So, 82% of the market is not the slightest bit interested in prices, or price directions, or any of those fancy technical squiggles and lines on a price chart. That means the people and/or institutions making those trades are not doing so for the same reasons as you and me. Businesses trade internationally and must settle transactions in foreign exchange regardless of price direction. International travelers exchange currencies daily because they need to, and not because a moving average crossover occurs or interest rates rise in Japan. This makes the Forex market an extremely random one, more so than almost every other market.
If you really want to profit from Forex, forget technical and/or fundamental analysis, and focus instead on currency strength/weakness analysis. Don't simply compare the AUD with the USD when contemplating a trade position. Instead, compare the AUD with the USD, JPY, CAD, NZD, GBP, EUR, and CHF, to determine if the AUD is universally strong or weak. If it's strong, pair it with the weakest and buy. If it's weak, pair it with the strongest and sell. Watch the difference this makes to your trading results.
The Forex market is entirely different from shares and commodities trading, and it exists for entirely different reasons. Speculators make up a tiny proportion of the Forex market. Retail traders like you and me represent just 4% of the market volume. Major hedge funds account for only 14%. So, 82% of the market is not the slightest bit interested in prices, or price directions, or any of those fancy technical squiggles and lines on a price chart. That means the people and/or institutions making those trades are not doing so for the same reasons as you and me. Businesses trade internationally and must settle transactions in foreign exchange regardless of price direction. International travelers exchange currencies daily because they need to, and not because a moving average crossover occurs or interest rates rise in Japan. This makes the Forex market an extremely random one, more so than almost every other market.
If you really want to profit from Forex, forget technical and/or fundamental analysis, and focus instead on currency strength/weakness analysis. Don't simply compare the AUD with the USD when contemplating a trade position. Instead, compare the AUD with the USD, JPY, CAD, NZD, GBP, EUR, and CHF, to determine if the AUD is universally strong or weak. If it's strong, pair it with the weakest and buy. If it's weak, pair it with the strongest and sell. Watch the difference this makes to your trading results.
