Currency trading strategies are essential to work out what to invest in, why and when to do it. If you are going to be trading in the forex market then it is essential to do some analysis. Currency trading strategies must make use of sound analytical principles.

There are two main types of analysis you can use for your currency trading strategies, Fundamental analysis and technical analysis. Some people don’t like analysis and prefer to go with their gut feeling, but if you rely solely on guesswork to make your trading decisions, there is no doubt that your trading capital will disappear very quickly.

Fundamental Analysis
Fundamental analysis will help to indicate the movement in the currency value. The release of financial and economic data from around the globe can influence the market heavily. Economic data such as the unemployment rate, interest rates, balance of trade, the consumer price index and many other factors will impact on the currency value.

The forex market is affected by world events and news more so than others and continuously reacts by the minute to the release of economic and financial data. Forex calendars show in advance what time certain economic data will be released. Traders must know which releases are expected in the week because it will influence their currency trading strategies. The best way to learn about the effect of fundamentals is to learn one piece of economic data at a time. This will help you make better-educated trades.

Fundamental analysis can be used by day-traders who have the time to watch the market to the minute. The forex news and market is particularly prone to short-term movements. Hence, 'timing' is of greater importance as fundamental analysis-based trading requires precise timing to trade the movements of the markets. Day-traders will normally make quicker and smaller profits with this approach.

Technical Analysis
Technical analysis comprises various techniques to study price movements of the forex market. The most widely recognised technique is based on charting. Candle charts, line charts or bar charts help the trader identify patterns and trends in price behaviour so the trader can determine when to buy and sell.

Support and resistance levels and trend lines can be plotted on charts to determine price trends or ranges. Momentum indicators can be used to provide additional information about price movement and to determine buy and sell signals. The forex market usually trends strongly so our currency trading strategies are usually trend-trading strategies.

Before selecting your currency trading strategies it is beneficial to look at a broad time frame to determine which way the market is trending. Trading in the direction of the trend is critical for successful trading in any market. A trend is simply the predominate move in one direction. Therefore a trend can either be an up trend or a down trend.

Trends may also be sideways though it is difficult to trade in a narrow sideways trend. A break in a trendline may indicate a trend reversal. The ability to spot new trends and identify whether a trend is in place is critical to your success. As an effective trader, you must be able to identify the current or major trends, the short-trends, and intermediate trends

Once we identify that the market is in a clear trending phase our currency trading strategies will lean towards identifying buying opportunities in an up trending market and selling opportunities in a down trending market. This is advantageous for your currency trading strategies since it makes little difference if the currency you are trading is trending up or down.

When finding buying or selling points, many currency trading strategies make use of patterns and identified support and resistance levels, the most important signals in forex trading. There are many other technical indicators and to name a few are the Relative Strength Index (RSI), Commodity Channel Index (CCI), and moving averages. You do not need to master the many dozens of indicators for your currency trading strategies. Through trial and error you can find the best combination of indicators and appropriate time frames.

Before employing any currency trading strategies in real life it is important to ensure that you understand the correct way to implement your techniques and correctly interpret any output it may generate. Your trading success will depend on your ability to develop and implement your currency trading strategies.

In summary, the fundamentals will indicate the direction of a price but not exact prices. The chart analysis or technical analysis is better for that, so when used together you can really increase your chances of making profitable trades.