Fundamental Analysis Vs. Technical Analysis
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Technical Analysis is best for short-term trading - there's is no doubt about that. Chart Patterns have worked for decades, in all timeframes from 5-minute to 4-hours and daily charts. If you want to day-trade there is no other analysis.
However, Fundamental Analysis might be better in the longer-term, though there is no solid rule of trading with Fundamental Analysis, and I daresay that Fundamental Analysis is even more subjective than Technical, because the people who know how to interpret Fundamental Data to trading decisions are rare. The trades also occur less frequently and can suffer big losses before price will play according to the 'fundamentals'. This sort of investing requires high discipline (and deep pockets).
The main thing is never to combine the two. Technical will be almost useless in the longer term, and Fundamental is meaningless in the short-term. Using them together will simply cause you to trade less (because you will need more confirmations) and your performance will decrease.
However, Fundamental Analysis might be better in the longer-term, though there is no solid rule of trading with Fundamental Analysis, and I daresay that Fundamental Analysis is even more subjective than Technical, because the people who know how to interpret Fundamental Data to trading decisions are rare. The trades also occur less frequently and can suffer big losses before price will play according to the 'fundamentals'. This sort of investing requires high discipline (and deep pockets).
The main thing is never to combine the two. Technical will be almost useless in the longer term, and Fundamental is meaningless in the short-term. Using them together will simply cause you to trade less (because you will need more confirmations) and your performance will decrease.
Hi
I prefer combination of both. Both are vital for me as i love news trading and it is important to me to track both technical analysis and fundamental analysis for all my trades.
Means before initiating any trade you check fundamentals and technicals of particular currency. As a day trader do you also use fundamental analysis.
The fundamental analysis helps you to understand why the currency pairs moves like that, and the technical analysis tells you what will happen.
This is a site, from my broker ACM, that kind of explains the diff
good luck!!!
Some times there are no particular reason for the movements of Currency pairs. Does fundamental analysis work in day trading, i read in a website that . "Avoid scheduled news: Listen all news or scheduled news but don't try to follow news in your trade, make your own trading plans and strategies." so what will you say about this sentence.
Yes that's what i said. The best way is to use both techniques.
Hey sofia
could you explain me how to use both analysis?
I prefer to use technical analysis, I only use fundamental analysis to avoid trading during the new event.
Hey sofia
could you explain me how to use both analysis?
yea sure...
In order to become a true Forex master you will need to know how to effectively use both types of analysis. Don't believe me? Let me give you an example of how focusing on only one type of analysis can turn into a disaster.
* Let’s say that you’re looking at your charts and you find a good trading opportunity. You get all excited thinking about the money that’s going to be raining down from the sky. You say to yourself, “Man, I’ve never seen a more perfect trading opportunity. I love my charts.”
* You then proceed to enter your trade with a big fat smile on your face (the kind where all your teeth are showing).
* But wait! All of a sudden the trade makes a 30 pip move in the OTHER DIRECTION! Little did you know that there was an interest rate decrease for your currency and now everyone is trading in the opposite direction.
* Your big fat smile turns into mush and you start getting angry at your charts. You throw your computer on the ground and begin to pulverize it. You just lost a bunch of money, and now your computer is broken. And it’s all because you completely ignored fundamental analysis.
Read babypips for more....
They are both important schools of thought, and most successful traders employ elements of both. Which method you lean towards depends on your time frame. As mentioned above, a short-term or "day" trader will lean mostly towards technical analysis, whereas a longer term trader will lean towards fundamental analysis.
well i also love both of them though understanding the charts can be a easier for some people i prefer fundamental analysis for better indepth knowledge
I trade with Elliott Wave analysis, so from my perspective the patterns you see in the charts drive the fundamentals, and not the other way around. So far my analysis has been very accurate.
Technical Analysis is always better. That is, if it's the right technical analysis being used. I believe fundamentals are a driving force behind the technical aspect of Forex. Events like news reports, interest rates, etc... are already dictated by what technical analysis shows.
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