STRATEGIES OF MARKET ANALYSIS FOREX: FUNDAMENTAL ANALYSIS.

STRATEGIES OF MARKET ANALYSIS FOREX: FUNDAMENTAL ANALYSIS.

On the foreign exchange market FOREX there exist two principal strategies of investment from which others divide many: there are the technical analysis and the fundamental analysis.

 The technical analysis basically is based on the analysis of the flow of the market from historical bosses, using as basic hardware the lines of support and of resistance of the flow of the currencies.

 The fundamental analysis is based in bearing in mind the different factors that influence on the market FOREX, as there are the important news, the events and other facts that do that a currency depreciates or his value increases. This is the analysis of the factors that influence the market, fact that was a matter of a previous article in www.smartforextips.com.

Both strategies are extremely successful depending on the mentality and style of the investor of FOREX. None of the two can say to herself that it should be better that other one, but each of them has his strong points and his concrete moments in which it is more suitable. For example, the strategy of fundamental analysis is more suitable when the market is volatile and unpredictable, also it is usually more suitable when long-term strategies are carried out. On the other hand, the technical analysis is especially suitable on stable markets and in short-term investments.

In this article we are going to speak on the strategy of Fundamental Analysis. He is going to explain himself in detail of which it consists and there are going to touch some important points that the FOREX investor must have to know to invest with this one strategy.

FUNDAMENTAL ANALYSIS:

To speak about fundamental analysis of the FOREX it is necessary to speak about two aspects that move principally the currency of a country: Called flow of capital and the flow of operations. The first one refers specially to the movements of the country at level of exports and imports, the second one refers to the quotation of the currency on international actions markets. These two factors are determinant in the rise or fall of a currency.

With regard to the capital flow it is necessary to clarify:

The capital flow, as it was already said, it has to do with the balance between imports and exports of a country. This means that if in a country the number of exports is bigger than that of imports his currency will have a tendency to be valued by this factor, since the merchants of the foreign countries will demand more the local currency, doing that this one is valued. Contrary, if the number of imports is bigger than the number of exports the currency will tend to lower of price for the influence of this one factor, since the merchants of the local country will have to sell a lot of of his currency, increasing his offer and depreciating his price.
Anyway, it be remembered that this, although it is a factor of important weight, is not the only one, and the fall or rise of a currency will be influenced by several factors simultaneously.

Specifically, the factors that influence the capital flow can be: The quantity of exports compared with the imports, the direct foreign investment, the societies between companies of the country and other foreign companies, the legal and measured norms that the government of the country takes to encourage the foreign investment, between many others.

With regard to the operations flow it is necessary to clarify:

As it was already said, this one has to do straight with the actions market. To observe the influence in the growth or fall of a currency of the flow of operations is necessary to observe the called actions index. The actions index is an index that serves to the FOREX investor to know so strong what this one at stock level a currency. This index represents what so much they invest the foreign countries in actions of companies that are in the local country compared to the investment of that one country with the foreign investments. The indexes that more observe the foreign exchange market FOREX are the industrial index Dow Jones, NASDAQ, NIKKEI, FTSE, S&P 500, DAX, between others.

There is another aspect to bear in mind with regard to the topic of the flow of operations: it is a question of the bonds expressed by the government of the country. These bonds only become truly important when the market of the actions is in an epoch of many suspense. In these periods, the investors tend to buy these bonds that offer more financial stability, but that in epochs of stock certainty are not so profitable. On the investment that the persons do on a global scale in these bonds there depends also the increase of the value of a currency, which will influence of important form the currencies that is invested in FOREX.


To return to Forex, Development.

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