The 6 Trillion Dollars A Day Market - Forex Trading (Fundamental vs Technical Analysis)

What would you do if you wanted to make big profits well you’d probably follow the tips of a big investor or try to work for a big company or maybe investing in a big financial market the stock market trades over more than 300 billion dollars per day that’s great but it’s not actually the biggest one there’s another market and it has a trending volume of around six trillion dollars per day, not a b that’s trillion with at it’s the largest market in the world.

WHAT IS FOREX?

And it’s actually very affordable if you want to join it you could easily spend three hours a day on your pc working from home or from a beautiful beach in Puerto Rico, yeah you heard right three hours a day the largest market in the world minimal time and investment required after all we are talking about six trillion dollars there must be a tiny tiny portion waiting for you this is the forex exchange market or forex or simply fx for friends and this is your getaway to your dreamy life in Puerto Rico with  Lamborghinis and wonderful mansions and whatever else you fantasize about ok enough jokes seriously this is something you could have heard from some fancy social media guru they sell their super-secret method to do quick profits after all the forex market really moves six trillion dollars per day it is really the largest market in the world.

And it’s very affordable for small investors so what’s the catch we’ll get into it in this Article so be aware of shiny promises and scams you can find on the web about the forex market this article itself doesn’t want to be an investment advice today we’ll just show you a few facts about the forex market and how you’re participating without even knowing it what will we cover in this article first we’ll understand what the forex market is and why it’s so important worldwide then we’ll take a look at the many factors that influence it they’re placed into two categories fundamental analysis and technical analysis which are basically the two faces of the same coin so stick around to learn more what is forex the forex market stands for foreign exchange.

HOW DO YOU TRADE IN THE FOREX MARKET

And it’s just like a stock market the only thing that changes is that you don’t trade stocks you trade currencies us dollar the Euro the British Pound the  Indian rupee and so on each country has its currency and citizens trade them to buy goods  200 years ago it wasn’t such a globalized world trades were done locally and possessing goods from another country was considered an extreme luxury nowadays it’s completely the opposite just look at what you have in your house most of the things that you own are produced in another country and that’s the norm but what currencies have to do with this let’s say you want to buy the ultimate forex mentorship program online from a fancy guru your currency will be exchanged into his by your bank when you’ll buy his course in a  little way you’ve participated in the forex market without even knowing it why because you basically just bought his currency the demand for it has risen.

And so is its price, of course, your action is just a microscopic drop in the ocean but add all the trades done worldwide every day you’ll obtain a tsunami let’s go over another example imagine you’re going on a holiday you move from us to France once there french people will unlikely accept your u.s dollars if you want to do all the funny stuff France has to offer you’ll have to exchange your dollars into euros let’s say you want to exchange two thousand dollars the exchange rate is around 0.85 it means that one dollar is equal to 0.85 euros the euro is more valuable than the dollar so for your 2 000 you’ll have 1850 euros days pass and you have a lot of fun there you visit the louver the Eiffel tower.

 And you spend more money on wine than you expected once the holiday is over you still have 100 euros left if you change them to 0.85 you’d have 85 but you decide to keep them as a memory two months later you’re in your house in the u.s you’re chilling on your couch and you see the news you discover that the exchange rate has changed it’s not 0.85 anymore it’s 0.95 the dollar has gained value over the euro it means that if you change your 100 euros into dollars you won’t have 85 dollars you’ll now have 95 so you’ve basically gained 10 dollars by simply holding your euros and waiting for the price to change if you’ve kept a thousand euros you would now have a profit of a hundred dollars pretty awesome right you’re just too sad to have spent so much money in wine it happens the same for our dollar.

And the Canadian dollar for us dollar in the  British pound or the euro in the British pound as you can see the forex market is not about a single currency it always works in pairs people don’t invest in the forex market going on holidays all the year long and exchanging currencies it wouldn’t be practical instead they trade currencies through an online exchange office run electronically within a network of banks how do you trade in the forex market as we’ve said earlier with the forex market you don’t just invest in one currency you invest in a currency relating to another this is known as a currency pair there are 180 currencies in the world right now it makes more than 30 000 possible permutations of pairs but more than 50 percent of the trades involved guess what the u.s dollar let’s take for example the currency pair u.s dollars.

And euros describes the price of the dollar against the euro right now the USD euro is valued 0.85 it’s pretty simple with one dollar you buy 0.85 euros it also works the opposite the EU USD is valued 1.20 with one euro you buy 1.20  what’s the difference if you invest a thousand dollars in the USD euro you’re basically betting that the dollar will gain value over the euro here’s the thing consider this currency pair just as a normal stock if you buy at x price.

FUNDAMENTAL VS TECHNICAL ANALYSIS.

And you sell it when the price rises you’ve made a profit but what are the factors that influence the variation of this price here comes two useful fellas but so different from each other fundamental versus technical analysis you might have guessed that knowing how the price will change in the future can be very profitable of course no one has a crystal ball to predict the future but there are signs that tell us how the price will change there are two different schools fundamental analysis and technical analysis let’s meet joe is precise.

And the patient guy he likes to observe the total picture to make his choices in the long term he’s a fundamental analyst let’s meet Jim now Jim is a fast and dynamic guy he likes to focus on a single aspect to make his choices in the short term he’s a  technical analyst Jim and joe are at the mall but they’re not there to go shopping they’re there to make money they sit on a bench in front of them they have five stores they both have to decide where to invest their money how do they do that joe who’s a thoughtful and reasonable guy he wants to do all the proper research to make the right bet he enters in one store to study the products the price for every single item.

And many other factors he also meets the manager and he tries to guess if he’s a wise manager or a total schmuck what he’s doing is a fundamental analysis he hardly believes that the price of investment truly matches the real value of it why is he so suspicious joe is a fundamental analyst just think of him as the annoying customer at the restaurant that asks the waiter if the shrimps are fresh or frozen spoiler they’re always frozen he strongly believes the economic sources drive the total value of the company he wants to be sure that the conditions of the company’s wealth reflect the price of that company he does the same long operation for all the five stores so it’s quite a long process wait what’s Jim been up doing the whole time he stayed on the bench he’s chilling with a milkshake in one hand.

And his pc on his lap don’t get me wrong he gauged the opportunity to invest in one of the five stores but in a different way, he’s a technical analyst the only thing he cares about is the variation of the price over time Jim believes the price is the only important factor to consider in order to invest or not at a company he also knows the price changes throughout time if there are different patterns and trends that repeat over time it’s very likely that they’ll do the same in the future  Jim looks at all the five different stores price variations over time he tries to understand which one has the best chances to grow in the future now let’s apply the same concept to the forex market joe thinks that Europe’s economy will grow faster than turkey it’s a strange example you’ll understand why in a minute in the result he thinks the euro will strengthen against the Turkish lira joe knows that things like geopolitical events economic news.

And government decisions change the price of a currency he also wonders how much money does the central bank produce he knows that the more an item is available the less value it has with money this is called inflation turkey has strong inflation above 11 right now euro has inflation at 1.5 percent joe decides to invest in the currency pair euro try he bets the euro will continue to gain strength against the lira but it’s not over yet many traders and economists say the most important factor that influences the forex market are interest rates when you buy a currency you put money in the central bank the bank says thanks for the deposit.

And it pays you back a percentage of your initial investment this is an interest rate the interest rate of the euro right now is at zero percent the central bank of Europe is saying you know what my currency is pretty strong right now I don’t think I’ll pay you any interest on the other side the lira has high-interest rates turkey’s saying yes please buy my currency turkey decides to raise the interest rates, even more, it raises from 11 to 15 this is very attractive for other investors they decide to buy the Lyra, not the euro the result joe is now losing a load of money with his euro try but the political instability.

And the high inflation has made the lira depreciated over the last few years so who knows what will happen in the future we hope the best for joe these are the basics of fundamental analysis as you can see many factors influence the variation of price and many of them are difficult to predict as we know Jim prefers graphics the euro slash try price changes a lot over time even within a single day this is known as high volatility and it’s a great opportunity for short-term traders like jimmy if he buys a currency at 2 pm and then sells it at 3 pm when the price slightly rises Jim makes a little money but multiplied for all the transactions he does.

And you’ll have a nice return on investment the question is how do you read  graphics once again there are many ways to do that the basic approach is by support and resistance  the fx price is volatile it means it changes a lot in a short amount of time if we connect all  the times it goes up we have a line on the graph known as resistance we can do the same when the  price goes down in this case it’s called support technical analysts know that trends tend to  repeat themselves over time if they notice the price breaks through the line of resistance it’s a  sign that probably it’ll do the same in the future this is a great time to buy on the opposite if  they notice the price breaks through the line of support this is a sign that the price could  decrease over time this is the right time to sell so who’s having the best approach well it depends it’s important to consider that most of the time  the best solution is a combination of the two you have to know when to use them just like when  you’re at the restaurant you have first courses and second courses if the first course is a  soup you won’t use a fork.

And a knife to eat it with the same logic you can’t eat a steak with a  spoon fundamental analysis should be used as an indicator to show you what to trade and in which direction to trade once you have this you can use technical indicators to understand what’s the best time to enter and exit to make the best profits we hope this article gave you a good perspective of what the forex market is and how it works remember no investment is risk-free and with the forex exchange market there a lot of risks involved use it as something to diversify your portfolio and not to retire at 25 and fly to Puerto Rico, in any case, think about it the next time you buy something online it’s just another little drop in the ocean but it’s what moves our world economy today if you’re interested in forex.

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