Fundamental analysis is the analysis of real data. It is mainly based on macroeconomic indicators which consist of figures like asset markets and FX rates. Asset markets in their turn include bonds, stocks and real estate.
When doing this type of analysis, one needs to study deeply all the available data in terms of news, etc. There are two types of news that affect the fundamental analysis: random and expected news. Random news happens without any expectations. This can be riots and different developments in political affairs which may have a great influence on the market prices. In contrast with random news the expected one is expected. But why is it important to make an analysis? First of all using Forex analysis helps to increase the effectiveness of Forex trading, regardless the trading techniques used.
Besides the fundamental analysis there exists another major analysis incorporated in Forex trading known as technical analysis. It can be characterized as one, which involves the study of different graphical analyses of currencies rates. They include any change which may affect the market movements: political and economical developments, predictions of specialists, evaluations of different analysts, and so on. It studies the market prices with the intention of making a final decision for profitable financial investment.
Today, due to the huge online resources every web trader both professional and newcomer can practice on the technical analysis. It uses a wide variety of charts that show price over time. The main difference between these two types is that technical analysis mainly studies the cause of market flows, while the fundamental analysis is focused on the effect of market flows.
Thus, it becomes clear that both the fundamental and technical analyses are essential tools for traders and the right usage of these methods will give an opportunity of maximizing profits.