Why do we lose money in trading? Some say it’s because market conditions are unfavorable, but do favorable or unfavorable conditions—or certainty versus uncertainty—really matter to us? Not at all. It is precisely because of this uncertainty that the market holds value and offers opportunities.In forex trading, profits aren’t made through luck, but through skill. This skill lies in our ability to understand and analyze market conditions—though sometimes luck does play a role. This article explores the patterns of forex volatility from the dual perspectives of “The Way” and “The Method,” aiming to enhance our “hard” skills in understanding and analyzing the market.
1. The “Techniques” in Forex Trading
What is ‘Shu’? ‘Shu’ means method. ‘Shu’ includes both fundamental analysis and technical analysis.
1. Fundamental Analysis Method
Fundamental analysis refers to the impact of macro factors on exchange rate trends and fluctuations, including economic factors, political factors, and socio-cultural factors.
(1) Economic analysis refers to the macroeconomic conditions of a country’s currency, which generally underpin the long-term trend of exchange rates. Commonly used economic indicators include GDP, monetary policy, the unemployment rate, the nonfarm payrolls report, and others. For example, in 2022, the Federal Reserve implemented a tight monetary policy—specifically, interest rate hikes—which caused the U.S. dollar to appreciate and continue to strengthen.
(2) Political factors refer to changes in domestic and international conditions, such as political developments, the enactment of policies and laws, shifts in the political landscape, and the outbreak of war, among others. Neither domestic conditions nor international relations can be resolved overnight, so their impact on exchange rates tends to be long-lasting. For example, the Russia-Ukraine conflict led to a sharp rise in international gold prices.
In other words, it’s about determining the direction of the market and identifying whether it’s trending up, down, or consolidating.
Therefore, combining the “Way” and the “Technique” in the foreign exchange market allows us to buy and sell at the right time and at the right price points, thereby increasing our win rate in forex trading.
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