I know that most of you are coming into the Forex markets with relatively small trading accounts. I also know that you want to grow your trading accounts while losing as little money as possible.
Technical analysis and fundamental analysis are the two basic areas of strategy in the FOREX market which is the exact same as in the equity markets. However, technical analysis is by far the most common strategy that is used by individual FOREX traders. Here is a brief overview of both forms of analysis and how they directly apply to forex trading:
The latest buzz in the Forex world is neural networks, a term taken from the artificial intelligence community. In technical terms, neural networks are data analysis methods that consist of a large number of processing units that are linked together by weighted probabilities. In more simple terms, neural networks are a model loosely resembling the way that the human brain works and learns. For several decades now, those in the artificial intelligence community have used the neural network model in creating computers that ‘think’ and ‘learn’ based on the outcomes of their actions.
The Consumer Price Index (CPI) has a major influence on forex trading. As an important economic indicator, CPI impacts not only forex, but also interest rates and stock and bond prices. The CPI is also used to make adjustments to cash flow mechanisms, such as pensions, health insurance and income. As a result, most traders and investors will find that the CPI affects their strategies in some way or the other. The CPI compares a household’s cost of a specific basket of goods and services with the cost of the same basket during an earlier period.
Fundamental analysis, or the analysis of the market based upon economic indicators, is a huge part of developing Forex market strategies. Most online Forex trading system platforms provide data on economic indicators through their online Forex journals, which are often offered free of charge. One of the more important economic indicators around is the Economic Cost Index (ECI), a major player that shapes and defines Forex market strategies.
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