WHAT ARE THE TYPES OF FOREX TRADING

Congratulations! You’ve gotten through the Pre-School and are ready to begin your first day of class. You did go through the Pre-School right? By now you’ve learned some history about the Forex, how it works, what affects the prices, blah blah blah.

We know what you’re thinking…BORING!  SHOW ME HOW TO MAKE MONEY ALREADY!

OR

You can take the green pill (green for money! Yeah!) And learn how you can make money for yourself in the most active market in the world, simply by using a little brain power. Just remember, your education will never stop. Even after you graduate from BabyPips.com, you must constantly pursue as much knowledge as you can, so that you can become a true FOREX MASTER!  Now pop that green pill in, wash it down with some chocolate milk, and grab your lunchbox…School of Pipsology is now in session!

Note: the green pill was made with a brainwashing serum.  You will now obey everything that we tell you to do! Mwuahahaha! <--evil laugh

Two Types of Trading

There are 2 basic types of analysis you can take when approaching the forex:

1. Fundamental analysis
2. Technical analysis.

There has always been a constant debate as to which analysis is better, but to tell you the truth, you need to know a little bit of both. So let’s break each one down and then come back and put them together.

Fundamental Analysis

Fundamental analysis is a way of looking at the market through economic, social and political forces that affect supply and demand. (Yada yada yada.)  In other words, you look at whose economy is doing well, and whose economy sucks.  The idea behind this type of analysis is that if a country’s economy is doing well, their currency will also be doing well.  This is because the better a country’s economy, the more trust other countries have in that currency.  

For example, the U.S. dollar has been gaining strength because the U.S. economy is gaining strength. As the economy gets better, interest rates get higher to control inflation and as a result, the value of the dollar continues to increase.  In a nutshell, that is basically what fundamental analysis is.

 

Later on in the course you will learn which specific news events drive currency prices the most.  For now, just know that the fundamental analysis of the Forex is a way of analyzing a currency through the strength of that country’s economy.  

Technical Analysis

Technical analysis is the study of price movement.  In one word, technical analysis = charts.  The idea is that a person can look at historical price movements, and, based on the price action, can determine at some level where the price will go.  By looking at charts, you can identify trends and patterns which can help you find good trading opportunities.

 The most IMPORTANT thing you will ever learn in technical analysis is the trend!  Many, many, many, many, many, many people have a saying that goes, “The trend is your friend”.  The reason for this is that you are much more likely to make money when you can find a trend and trade in the same direction.  Technical analysis can help you identify these trends in its earliest stages and therefore provide you with very profitable trading opportunities.  

Now I know you’re thinking to yourself, “Geez, these guys are smart.  They use crazy words like “technical” and “fundamental” analysis. I can never learn this stuff!” Don’t worry yourself too much. After you’re done with the School of Pipsology, you too will be just as….uhmmm…”smart?” as us.

By the way, do you feel that green pill kicking in yet?  Bark like a dog!