The original title of this article was Fundamental vs. Technical analysis. This would have been a fallacy. Fundamental analysis is not in competition with technical analysis. They compliment each other. In order to be an effective trader on the Forex market a trader must consider both fundamental and technical principles.

Fundamental Analysis uses economic, political, and social circumstances. These forces affect the supply and demand.

There are 4 major forces that cause changes:

Unemployment
Increase=Lower prices
Decrease=Higher Prices

Gross Domestic Product (GDP)
Increase=Higher prices
Decrease=Lower Prices

Balance of Trade Deficit
Increase=Lower prices
Decrease=Higher Prices

Interest Rates
Increase=Higher Prices
Decrease=Lower Prices

Economists keep track of these forces using economic calendars. Economic calendars keep track of announcements and market moving events.

The Foreign Exchange Market

The Foreign Exchange Market is a currency trading market. It is open 24 hours a day, 5.5 days a week. This is possible because the market trades electronically.

There are 164 total currencies traded, but 8 major ones. These are the U.S. Dollar, Japanese Yen, Euro, British Pound, and Swiss Frank. The Australian Dollar, Canadian Dollar, and New Zealand Dollar are popular as well.

The leverage on the Forex market is much higher than the stock market. Some brokers offer upwards of 250:1. This gives the trader a greater chance to profit.

The probability of a major currency failing is very slim. A US dollar will fluctuate in value but never completely devalue the way a stock may.

The Stock Market

The stock market consists of stocks of publicly held corporations. It is open 6.5 hours a day Monday through Friday. Approximately 8000 different stocks are traded.

In order to trade on the stock market an investor must have a broker. This broker acts as n intermediary(middleman) and executes the trades. They usually charge fees on top of a commission to make the trade.

There is no capital requirement to trade stocks per se. A trader must be able to afford the stock and the commissions to purchase it. If a trader wants to open a margin account $2500 is the minimum deposit. A margin account uses money loaned by the bank for trading.

This can be risky because stocks can fail suddenly before a trader can act. Their trade volume may decline rapidly and stagnate the stock. Remember what is borrowed must be paid back.

There are government restrictions on stop orders and short selling.