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FUNDAMENTAL AND TECHNICAL
ANALYSIS IN FOREX
Fundamental analysis is the study of various fundamental factors (so-called fundamentals) related to the financial instruments being traded such as economic and political conditions, interest rates, GDP, employment, production, manufacturing etc.
Technical analysis is the research of market dynamics with the help of graphic charts aiming to forecast future price movements.
The notion ‘market dynamics’ includes three primary sources of information at the disposal of technical analysts, i.e., price, volume, and open interest.
As it may be rather hard to measure real volume and open interest in the currency market, the most important and accurate data source for us is price. This brings us to another definition.
Technical analysis is the study of previous price fluctuations intended to predict future exchange rate movements (in the context of forex trading). Price movement is the key statistical factor in the world of technical analysis, because it is the only precise measurement of investors’ sentiment that reflects the ratio of demand and supply in the market.