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The forex market is a great place to invest money. Consider some various factors. First of all, unlike the stock markets, the forex market is open 24 hours a day, excluding the weekends. Other factors include its geographical dispersion, the large trading volumes and the large number of traders in the market. A smart investor can easily grasp all the profits available in the “FX” market. Frankly speaking, with a little experience and with some knowledge, you too can be one of the “smart investors”.

There are a couple of trading strategies in the forex market market which is, fundamental analysis and technical analysis. Let us take a look at each of these strategies.

Fundamental analysis deals with the social and political factors of a region, the employment picture of a country and it’s various industries including the business cycles of that region and government policies. Using this data, the trader can predict the future of the region or country’s currency. The stronger the factors of the country, the better the future the currency is. Fundamental Analysis is prominent amongst the long term traders. It can be quite difficult to predict the markets during silent times of activity when analyzing fundamentally. In this analysis two minor trading strategies are capital flows and trade flows.

Capital flows is the flow of money through foreign direct investments, joint ventures,and third party licensing agreements that reflect the economic growth and financial stability of a country. Equity market investments, and fixed income market investments are common portfolio investments. Trade Flows is the international imports and exports carried out between different countries. It plays an important role in forex market as the importer needs to sell his currency in order to purchase the goods from the other country. It can be a great example of currency exchange and probably is the best way to predict the currency’s future. Global news and happenings as well as a country’s specific happenings also affect the forex market. So it is always good as a fundamental trader to keep a track of the world news and country’s relations when investing in its currency.

Technical Analysis is another trading strategy used in the forex market. This analysis predicts the future movements of the currency by having a look at its past performance. A technical trader studies past graphs showing the up and down movements of the currency.

Tools used by a fundamental investor are: Relative Strength Index (RSI):This is a ratio of up and down movements of a currency and equates on a scale of 0-100. A second tool is Fibonacci numbers theory: The Fibonacci number sequence (1,1,2,3,5,8,13,21,34…) is used by adding the first two numbers to arrive at the third. As a forex trader, one may use them to calculate profit targets and price retracement levels. The last tool is Elliot Wave Theory: It shows wave patterns and fibonacci number sequence. Ideal Elliot wave pattern shows a five-way forward advance followed by a three way recline.

These are the two trading strategies used while investing in the forex market. Each has its positive and negative points so it’s up to you to chose which one you wish to follow. A trading strategy harms only when you apply it without correct knowledge.

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