Learn to play the market by playing a game

Forex is a complicated system which still often confounds people with years of trading experience. Knowing how a situation usually resolves itself does not mean that you will be able to correctly predict how it will resolve itself every time. The market data is an excellent way of judging what the situation is at any given time. It is also as good a way as you will find of predicting future market behavior. Nonetheless, it is not a guaranteed predictor and consequently even the most experienced traders sometimes make a mess of things.

The less experience you have – in anything – the more likely you are to have the wrong reaction to a given situation. If this is in a golf match, then all that rests on your mistake is a little personal pride. On the Forex market, it can end up costing you real money. It is therefore massively important that you have as much knowledge to back up your every decision as you possibly can. One way of accruing knowledge without making costly mistakes and potentially bankrupting yourself is to start by playing online Forex games. These are a kind of simulator which closely reflects the real-life market and tells you how good your instincts are – without ruining you if you make a mistake.

There are Forex games available on the Internet which run entirely free of charge. There is obviously some variation in quality, and you should ensure that you check out more than a couple before committing to one. The more experience you gather before playing for real, the better your chances of making real money in the future.

Fundamental Analysis of the Forex Market

It is broadly accepted that there are two ways to analyze the Forex market. These are described as “fundamental” and “technical” analysis. Which of these methods works at which time? To help understand how and why, this article will look at fundamental analysis. This is a style of analysis that looks at political and economic conditions which affect exchange rates. Most commonly, these factors include employment rates and economic policies of a governing party. It therefore stands to reason that a general election in a country will have some bearing on the Forex rate for that country’s currency.

Fundamental analysis, as the name suggests, gives a broad overview of the way currencies move, and enables an understanding of where a certain currency is going. The role of fundamental analysis is to strengthen your strategy by giving it an underpinning of sound, concrete factors which have been proven, time and again, to govern how a currency will perform.

To understand the present behavior and confidently predict the future behavior of a currency, it is worth knowing things like interest rates (considered to be an indicator of continuing strength in a currency) and economic factors such as GDP and foreign investment. If a company invests in factories, offices and labor in a foreign country, it brings wealth and potential to that country, and is likely to give its currency a boost. Knowing that a country has foreign investment in the pipeline can enable confident prediction of its currency strengthening and remaining strong.

Technical Analysis of the Forex Market

Along with fundamental analysis, technical analysis is one of the two main methods of informing oneself and building a stronger position to profit from the Forex market. While fundamental analysis allows you to predict the movement of a currency by looking at the political and economic position of a country, technical analysis has more to do with looking at collected market data and using it to predict future movement. This is an approach that is very commonly used on the stock market, for example, where historic data is the single most important part of predicting future performance.

While a fundamental analysis will look at the reasons for market movement – allowing us to know why something happened – the technical analysis of the same market will tell us exactly what happened. That is to say that it will give us the raw data. Fundamental analysis requires an extremely broad view and, for those who are disinterested in politics, can be overly time-consuming. If these people are strong technical analysts, they can usually learn enough from the movements themselves. Whatever the reason for a movement, the fact is that currency prices follow trends.

Regardless of anything else, people know that patterns have emerged in how foreign currencies behave, patterns which have held true for more than a century. These patterns mirror human behavior – one of the few constant things in the world – and therefore are an excellent way of predicting the future. You may not know who the President of a certain country is, but if you know how its currency performs over a period of time you are well within your rights to not care.