Sunday, March 1, 2009

Fundamental analysis of Forex trading

In Forex World, Though you successfully use the technical analysis method, you can not gain optimum success without using Fundamental analysis method. It is an external analysis of the Forex Trading.

In business we remember the SWOT analysis. It is an analysis which involves the deep investigation about internal and external factor that contributing success to the business itself. SWOT stand for Strength, Weakness, Opportunity and Thread. If you analyze the Strength, it means you do an analysis for the internal factor of your business. You may ask the question like “what is strength of my business” and so forth. The Weakness analysis let you analyze the weak point of your internal business which you need to upgrade. Here comes to the external factor. The external factor involves the analysis about opportunity and thread. So, what is the connection between this with the internal one? You use your strength to get every opportunity available while you also have to be aware of the thread which may be caused by your weakness.

My purpose of telling you the overview about the SWOT analysis is giving a bright description about the fundament analysis of Forex Trading. Fundament analysis is the external analysis which has the same function as the opportunity and thread in the SWOT analysis. You have to look the external factor which has any implication to your Forex business. It has to be relevant with your Forex business. If you fail to perform this analysis, you will be facing trouble which you can not solve with the technical analysis. They both have to be used one after another.

So, what is it exactly? The fundament analysis is used to forecast the future price of a financial instrument. This require the analysis of political, economic and environmental which have the possibility to directly or indirectly affect the demand and supply. This analysis focuses on the possibilities of things which might happen in the future. By referring to this possibility, we can make the forecast which may reflect the real future condition. This is possibilities, which mean that it can not have 100% validity. Though in some cases it is not quite what we expected, we can still count the possibilities. They key to approach this analysis is to watch closely to the political and economic life. Be prepared to any new political or economic policy as it will make you money or loss you some.

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