You will find numerous forex traders in the market swearing by the efficacy of forex news analysis. However, at the same time, you would also find countless forex traders who would explain to you in detail why analysing forex charts is a much better way to get your forex signals.
These two conflicting beliefs have been around since retail forex trading became possible but there is still no resolution to be found. There is a reason for this and it is the fact that both these techniques have their benefits for forex traders.
How should you choose which method may be better for you? Here are some answers which should help you choose between forex news and charts.
Understanding Forex News and Charts
Before you can choose wisely between forex news and charts, you will need to understand them first. Analysing FX news items is known as fundamental analysis where you will be focusing on what occurs in the world and how it affects the forex market.
On the other hand, using charts to analyse the market is based on the logic that when conditions are alike, the market reacts in the same manner as it did in the past. Therefore, when you trust forex charts you essentially are looking for trends and patterns that have occurred before.
Choosing whether you want to use forex news or charts as your tool for analysing the market requires you to assess your general inclinations in life. For instance, an individual who finds himself especially good with statistical data might find technical analysis more appealing and easy.
In contrast, an individual who follows world events and likes to make sense of them in his or her head may be more inclined towards using FX news items for analysing the market.
Direct vs. Indirect
Depending on the nature of the two analysis techniques, it can be said that using forex news is a more direct analysis while utilising charts is more indirect. Using FX news for your analysis would mean that you are relying on the relationship between cause and effect.
In other words, you would be going to the main drivers of the market. However, if you use charts instead of FX news items then you are assessing the actual nature of the market i.e. repetitive.
Time Frames Concerned
Before you choose either forex news or charts, you should also consider the nature of your own forex targets. Your targets and trading process would influence your choice greatly.
For example, if you are interested in scalping then FX news items would be all but useless to you except that they will show you when you should not trade. However, if you are interested in long term investments then news analysis may be more beneficial for you than chart based analyses.
Time Related Considerations
Finally, you should also take into account how much time you will have for forex trading before deciding whether you want to depend on forex news analysis or a chart based system.
The reason for this is that using FX news for your market leads would require you to be available in the market all the time as this kind of analysis is very sensitive. On the other hand, if you will not have as much time then you may find analysing charts a better option.