There are two basic techniques for analysing the forex market. One is fundamental analysis and the other is technical analysis. Fundamental analysis focuses on economic and political causes for price movements. Technical analysis, on the other hand, assesses the price movements themselves.

Technical analysis focuses on price movement. Historical and current price movements are evaluated to predict the direction that prices will take. Technical analysis assumes that all market information is included in and reflected in the current market prices, which is why technical analysis can provide a basis for expert trading decisions. The most important tools in technical analysis are charts. Charts are used to identify trends, waves, channels and patterns so that they can be used to visualise profitable opportunities. Numerous indicators are also available. Technical analysis proves that markets tend to follow clear trends. Defining trends is thus a basis for the early stage of development in technical analysis.

Fundamental analysis concentrates on economic, social and political influences which reflect supply and demand. Fundamental analysis looks at various macro-economic indicators, such as economic growth, prime interest rates, inflation and unemployment figures. Unfortunately, only theories are available as to how these influences should be weighted and evaluated. Fundamental analysis is very complex because it has to take into account all global influences. Constant change ensures that there are plenty of surprises.

Most FXCM traders use technical analysis, since it does not require hours of study. Once you have mastered the application of technical analysis, it can be used in other areas as well. In contrast, fundamental analysts tend to specialise, since there is an overwhelming flood of data available.