Forex Charts Or Forex News?

By: Charley Warady

In the red corner, weighing 245 pounds and wearing blue shorts, is Mr. Fundamental. And in the blue corner, weighing 120 pounds and really thick-lensed glasses, wearing paisley shorts, is Mr. Technical. When the opening bell of today's Forex market rings, come out fighting. And may the best man make the most PIPs.

The scenario may be a little extreme, but those kinds of arguments ensue in the Forex market on a daily basis. Avid fundamental Forex traders go toe to toe with the avid technical traders; both mocking and decrying the other's ability to trade the Forex market. As is true with just about everything, the best way seems to lie somewhere in the middle- between the Forex charts and the Forex news.

The fundamental analyst relies on the Forex news of the day. The reaction of the Forex market to the Forex news is usually apparent. The term “usually” is particularly relevant because of the way the Forex market has been (or better said, hasn't been) reacting to Forex news in these past couple summer months. The Forex market seems to be on an upward path in spite of any kind of Forex news that has come out.

The reason is the timing of the Forex news. It is summer. The big financial institutions are not reacting to the Forex news because they're on vacation. There's no power to shift the markets, so it proceeds according to the Forex charts. In months like July and August, the Forex technical analyst and his Forex charts in Forex definitely has the upper hand. So it would seem that one could ignore the Forex news and keep one's nose in the Forex charts. A dangerous play, indeed.

All too often, you will hear the Forex technical analyst scream out in panic, “How could the market have done that? My  Forex chart says this is a major support area!” What the Forex chart didn't tell him was that news just came out that there was an interest rate decrease in the currency which threw everything out of whack. (The phrase “out of whack” is used for discussion purposes only, of course). In the meantime, the fundamental analyst saw this and was all over it, taking advantage of the sudden turn in the market.

Both fundamental analysis and technical analysis are needed to be a balanced Forex trader. You'll wind up not only saving a lot of money by not being caught by surprise, but you'll make more money by taking advantage of the opportunities provided by both systems.

The trend is your friend. The trend is found by studying Forex charts and becoming a technical trader. However, to guard yourself against a sudden end to the trend, you'd best be aware of the Forex news that is happening around you while your nose is in the Forex charts.

The Forex news is what makes the market. The technical side is what sustains the direction. The technical analyst will tell you what direction the Forex market is going to move in and the fundamental Forex trader will smile and say, “Until something happens that it doesn't.” They are both right. It is best to listen to both. The result of the fight always ends in a draw.