Most of the top traders in the world study the fundamentals as well as using charts and the reason they do this is simple – Forex markets move to the long term supply and demand situation but in the short term human emotion rules and charts can help define the greed and fear present in the market and indicate areas of fair value.

A simple equation for Forex market movement is:

Supply and Demand Fundamentals + Human Perception of = Price

As you can see from the above its not the supply and demand fundamentals that are important in terms of Forex market movement its how humans perceive them which creates any price in any market. In the short term greed and fear control price movement but over the long term, the supply and demand fundamentals do as greed and fear peak in the short term.

If you want to see a graphic example of this, look at a long term price trend using a key moving average and notice the following -while the long term trend maybe up in line with a key moving average, prices will spike up or down, as greed and fear control investors. These price spikes always come to an end quickly and prices return to fair value or the average but during these price spikes, fair value counts for nothing as humans push prices to far as their emotions come to the fore.

A Forex Trading Strategy – Combining Technical and Fundamental Analysis

The professional trader, always keeps his eye on the long term fundamentals with a view to seeing, where the prevailing trend is and tries to work out whether its bullish or bearish and aims to trade with the trend.

In an up trend when prices spike to far to the upside, he uses this to book profits and when prices move to far to the downside he uses this to load up on longs.

In the short term, charts are important in terms of looking for areas of value and also judging how overbought or oversold the markets are in the short term and he will use trend lines and momentum oscillators to determine this. Longer term, the trend will be clear from trend lines and key moving averages.

In addition to charts, you can get an idea of how overbought or oversold the market is by checking out market sentiment to judge how bullish or bearish the markets are and two good reports to use are - The Net Traders Positions, published each week by the CFTC and % Bullish which is published by Market Vane.

There are many other reports but the above two will give you a clear idea of how greedy or how fearful investors are at any point in time and if you know this info, you can get advance warning of a potential trading signal and then, move to your charts to time your entry.

Forex Traders – Predicting their Movements

You cant tell exactly what Forex traders will do in advance because of course human nature is not predictable but you can judge the odds on any trading set up and the reason for this is human nature is constant and never changes. In the short term greed and fear will always come to the fore and in the long term, the fundamental supply and demand situation will always prevail.

Trade Like the Pro's

If you study fundamentals and use your charts for timing, you gain greater trading accuracy with your trading signals and make far bigger profits. So trade like the pros do and don't see fundamental analysis and technical analysis, as separate disciplines – combine them and you will gain an edge, in your quest for currency trading success.