03/09/2013 by admin

There are two ways that you can analyse the forex market and that is through fundamental and technical analysis.  When you look at technical analysis you will be using charts, but with fundamental analysis you will be looking at forex news .  There are a lot of traders who only use one form of analysis.  However, there are other traders who state that the best way to analyse the market is to use both analysis methods.  It is important that you know about the benefits and disadvantages of blending charts and forex news.

The Benefits of Blending Forex News and Charts

When you look at anything on the forex market you have consider what the benefits and disadvantages are.  When you do this you will be able to properly determine whether or not something is right for your trading.  There are three common benefits that come from the blending of forex news and charts:

• Determining when trends could start.  One of the most common ways to trade on the forex market is with trends.  When you look at trend trading you have to consider how early you can get into the trend.  The earlier you get into the trend the more profits you are going to make.  When you combine the analysis methods you will be able to determine when a trend should start.
• Tracking short-term movements is something that many traders feel can only be done with technical analysis.  However, when you combine the analysis methods you can track short-term movements in relation to the causes.
• Tracking the reactions over time.  When a high impact news release comes out the market will be affected.  When you trade fundamentally you are going to open a position based on this.  However, you have to combine the analysis methods to properly track the reactions over time and know when you should be exiting the market.

The Disadvantages of Combined Analysis

While there are many benefits to combining analysis you have to know about the disadvantages as well.  Only when you know both sides will you be able to properly determine whether or not you should be combining the analysis methods.

• The reading of charts and the analysis of news is subjective.  When you combine these two analysis methods you are working completely on subjective material.  This means that the way you analyse the combined data may not be the way someone else does.  This can lead to bad trades if you are not careful.
• Using the two methods can be more time consuming.  There are a lot of people who find this combined method to be time consuming because you are completing two different types of analysis and then combining them.
• Combined analysis is out of the comfort zone.  When you start trading you are told to find your trading comfort zone and use trading strategies that you are comfortable with.  There are a lot of traders who are not comfortable with one type of analysis.  When they have to combine the analysis this makes them uncomfortable and this can negatively affect your trading.