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Of all the moving parts involved in trading forex, interpreting the signals the market gives you is the most important. They are what allows you to make decisions about entering and exiting trades, position size and everything else that makes trading profitable. Heres the important stuff you need to know about analyzing the market to find those signals.

As a trader, these signals are the critical information you always need to be looking for. Thats because they can happen at any time of the day or night, and can often require immediate action if you want to take advantage of them. So what do you feel is the the best way to learn how to spot the signals the market is giving you?

Truthfully, this is a skill that only comes to you through continued study and actual trading experience. Having said that, the first thing you need to master is distinguishing between the various clues the market is trying to give you. In other words, before you can recognize and interpret market activity, you need to understand the different kinds of analysis.

There are broadly two kinds of analysts who study the market trying to work out which way it might be headed. Some use technical analysis and others use fundamental analysis. Lets cover each each type so youll understand what were talking about.

Technical analysis (TA) depends entirely on understanding and interpreting data and price charts. You dont need any special knowledge about political or economic events to use Technical Analysis. Thats why its best to start with this one first, and only after youve mastered TA should you move on to fundamental analysis.

Once you understand technical analysis and can read a chart, youll be able to spot trend changes and continuations very easily. This will help you enter and exit the market at the right price and time, giving you an opportunity to maximize your profits.

On the other hand, Fundamental analysis focuses on political and economic factors, while ignoring price like charts and technical indicators. It considers things such as economic policy, news and current events, and government announcements that affect the economy.

Traders who favor fundamental analysts say technical analysis can only tell you whats happened in the past, and theres no way it can predict what is going to happen the future. According to fundamental analysts, currency prices relate directly to profits, GDP and economic activity, and thats why they spend more time looking at these factors than anything else.

Being able to recognize what the market is saying and being able to act on that information is the key for forex trading success. Thats why its important that you learn about the both forms of analysis. Having an understanding of each one will enable you to identify market signals and trade them profitably, which is ultimately what you want to do.