In trading Forex, there are two basic systems to follow in your trade. A trading system is a set of parameters that predicts the price movement of a currency. Professional traders will use a trading system because it helps to determine when to enter a trade, how long to hold it, and when to sell and take a profit or accept a loss. These are decisions that traders make every day in every trade.

Using A Good Trading System Will Not Protect Against A Losing Trade; However, it will help to keep losses to the minimum extent. It can also maximize the profits on each trade. All in all, a trading system takes much of the predictions out of trading.
Basically there are two types of trading analysis as you approach the Forex market:

1. Fundamental Analysis
2. Technical Analysis

Fundamental Analysis

A fundamental analysis relies on the release of economic reports and the data found in those reports as parameters for entering a trade. This type of system depends much more on demand factors than technical trading systems. The parameters are the economic reports and their ability to affect the demand for a currency.

In order to find out that the fundamental analysis is doing well, you have to look if the economy of the country is doing well too. If the country's economy is doing well, you can be quite sure that the currency of that country is doing well just the same. The better the country's economy the better is the trust that other countries have for them as well.

• Fundamental Trading Systems do not usually combine more than one report at one time, but will use only report and its analysts’ expectations to determine if demand will be increased or decreased. Charts are not considered or used by fundamental trading systems.
  When the economy of the United States increases in value the value of their money is increased too, and this is the basis of fundamental analysis.
  

• Fundamental Trading Systems can be quite useful because they look at the real moving force behind a currency price movement, namely the demand for a currency. Their predictive force is accurate, particularly when they adopt an Intermarket approach.

Unfortunately, the economic reports can surprise everyone, including the experts. When that happens, the parameters will not be met or will fail, leading to losses. Moreover, the price change is often factored into the currency price by the time the economic data is released. So, even if the report is consistent with the analysts’ expectations, the price might not move or any price movement will not be strong or reliable.

Technical Analysis

This is the study of movement; traders look at charts that list the historical price movement and based on the price action try to determine whether the price will go up or down. The main aim is to look at charts and find trends and patterns to help you capitalize on good trading opportunities. In other words, technical analysis relies on technical indicators and charting techniques.

The parameters for the system are determined alone by certain price movements on charts and the data from technical indicators. For instance, a technical analysis could employ a parameter that the currency price must be within five percent of the 20-period moving average line. Another example is that a trading system looking for a strong trending currency could require that the ADX level is above 40.
The most important thing to learn and follow in technical analysis is the trends. The reason why traders believe that the trend is their friend is simply because this is where they make money, lots of money after learning and following these trends. If you know where the trend is you will be able to know where to trade.

• Technical Trading Analysis is used by both range traders and trend traders. There is so much technical data available that the indicators can be used for a wide variety of price movements.

• Technical Trading Analysis is inexpensive, easy to use, and very reliable. They can be as basic or as detailed as the trader can manage. Also, they quite precise by clearly showing the entry and exit points for a trade.

The limitations of technical trading systems are similar to the limitations of technical analysis in general. These are unpredicted certain events (such as terrorist attacks, wars, natural disasters, etc.) that cause technical analysis to fail.

• Which Type of Analysis Is Better for You?

At an early stage of trading business you will be able to learn where to look for the trend, and technical analysis can be able to help you find it and then trading will be profitable with these great opportunities. For some reason people feel like they need to limit themselves and pick one. Both fundamental and technical analyses have their advantages so why not use both? That's just good logic as they both affect the market.
By learning both fundamental and technical analyses a Forex trader can maximize their profits. While some prefer one system to another, the best traders use both.
And here are some answers to common questions:

• In case you are a "long-term" investor looking for companies with solid foundation, growth and income potential, the fundamentals may sway you.
• In case you are a "short-term" investor (trader) looking for companies who are "on the verge" of being discovered, fundamentals will be useful to you.
• In case you are a "long-term" investor who is not as concerned about one company's basics because you will diversify to minimize risk, or you are a "short-term" investor waiting for investor sentiment to change, then technical analysis will be helpful to you.