Better where; Technical Analysis or Fundamental Analysis?
Is one of the most frequently asked questions of traders. If the type of technical analysis (mostly) can be applied in all charts; Fundamental analysis requires a deeper study of the economic components of a country, so that it can be influenced by subjective factors, such as the issue of the press's sake in the news of an economic news.
The striking differences between the two analyzes are:
Character technical analysis:
Focus fully on charts and previous price / level;
Traders often stick to the indicators and tools available on their trading platforms;
Traders are trying to anticipate price movements using past data.
While the fundamental character of the analysis is:
Focusing on the economic factors that drive the financial strength of a country / pair;
Traders often follow the fundamental news and releases of economic data;
Traders believe sentiment arising from the news / economic data can affect price movements.
It is rare for a forex trader to fully understand the current chart / price condition by using only one type of analysis. Most traders consider some elements that contain other types of analysis than they use. Example; Even if you are a trader who uses technical analysis, of course you will still pay attention to when news / data NFP (for USD pair) released every month.
Technical Analysis helps to see the history of price movement
Technical analysis has a huge role in forex trading, even the role in the forex market is far greater than its role in the stock market; The place where this type of analysis was popularized.
The "art" of technical analysis focuses on analyzing charts and developing strategies for opening positions based on the results of the analysis. There are many ways to do it, and many traders often include the results of indicators, price actions, and various other types of analysis systems to determine the positions to be opened based on past price movements.
This type of analysis is able to provide us with various types of information, such as market sentiment in the previous chart, or misinterpretation of the economic data seen in the previous chart. However, there are things that can not be perfectly accurate by this type of analysis; Namely what will happen next with future price movements. And for that matter, a second type of analysis was introduced; Namely fundamental analysis.
Fundamental Analysis helps to prepare price movements in the future
Releasing news and economic data to the market, changing bid and ask prices in positions opened by traders (often done by large traders / banks / other institutions). The release of economic news often serves as a "fuel" for the market, and then shapes the direction for future price movements.
The release of news or economic data can bring about "chaos" in the market as reflected by daily volume and / or market volatility, and trading on fundamental analysis does not necessarily mean that you have to open positions every time the economic news is released. In fact, traders can use the strategies they have previously set up with technical analysis to plan their positions when economic news is released.
The most noticed / interesting feature of this type of fundamental analysis is the anticipation we can make before prices move away when economic data is released. Nevertheless, we need a sufficient understanding of the meaning of this message, so that we do not mistakenly translate it and then produce a disadvantageous position for ourselves.
Integrating Technical and Fundamental Analysis
When a trader wants to open a position, the first thing they do is look at the trend of the chart, to identify the "biases" that may be on the chart. This can be done by using the Price Action method; Such as by using the information contained in this article. For an uptrend, it can be composed of price movements composed of: the level of supply and the level of resistance that continues to rise; While for the downtrend, composed of: the level of supply and resistance continues to decline. As shown in the picture below.
When traders see an uptrend, traders will try to identify supply / support levels and wait for prices to touch those levels before opening positions. Conversely, when the price in the downtrend, then the resistance levels that traders will look for.
However, the trend may change at any time. By integrating fundamental aspects of the techniques used by traders, traders can see opportunities to place buy positions at "cheap" prices and place sell positions at "expensive" prices. In short, traders should be able to react to market / price reactions when economic data are released. Traders take a more favorable position than the market's over-reaction.
For example: when a rising trend is seen in the chart, and there is a positive sentiment in the newly released economic data, then the trader will focus entirely on identifying the right level to place the buy position. However, as the trend is rising, and newly released economic results show great negative sentiment, traders should be able to identify the right resistance levels to post sell positions and wait for a breakout of the uptrend going on.
Again, all fixed positions still meet the predetermined requirements of money / risk management.
Is one of the most frequently asked questions of traders. If the type of technical analysis (mostly) can be applied in all charts; Fundamental analysis requires a deeper study of the economic components of a country, so that it can be influenced by subjective factors, such as the issue of the press's sake in the news of an economic news.
The striking differences between the two analyzes are:
Character technical analysis:
Focus fully on charts and previous price / level;
Traders often stick to the indicators and tools available on their trading platforms;
Traders are trying to anticipate price movements using past data.
While the fundamental character of the analysis is:
Focusing on the economic factors that drive the financial strength of a country / pair;
Traders often follow the fundamental news and releases of economic data;
Traders believe sentiment arising from the news / economic data can affect price movements.
It is rare for a forex trader to fully understand the current chart / price condition by using only one type of analysis. Most traders consider some elements that contain other types of analysis than they use. Example; Even if you are a trader who uses technical analysis, of course you will still pay attention to when news / data NFP (for USD pair) released every month.
Technical Analysis helps to see the history of price movement
Technical analysis has a huge role in forex trading, even the role in the forex market is far greater than its role in the stock market; The place where this type of analysis was popularized.
The "art" of technical analysis focuses on analyzing charts and developing strategies for opening positions based on the results of the analysis. There are many ways to do it, and many traders often include the results of indicators, price actions, and various other types of analysis systems to determine the positions to be opened based on past price movements.
This type of analysis is able to provide us with various types of information, such as market sentiment in the previous chart, or misinterpretation of the economic data seen in the previous chart. However, there are things that can not be perfectly accurate by this type of analysis; Namely what will happen next with future price movements. And for that matter, a second type of analysis was introduced; Namely fundamental analysis.
Fundamental Analysis helps to prepare price movements in the future
Releasing news and economic data to the market, changing bid and ask prices in positions opened by traders (often done by large traders / banks / other institutions). The release of economic news often serves as a "fuel" for the market, and then shapes the direction for future price movements.
The release of news or economic data can bring about "chaos" in the market as reflected by daily volume and / or market volatility, and trading on fundamental analysis does not necessarily mean that you have to open positions every time the economic news is released. In fact, traders can use the strategies they have previously set up with technical analysis to plan their positions when economic news is released.
The most noticed / interesting feature of this type of fundamental analysis is the anticipation we can make before prices move away when economic data is released. Nevertheless, we need a sufficient understanding of the meaning of this message, so that we do not mistakenly translate it and then produce a disadvantageous position for ourselves.
Integrating Technical and Fundamental Analysis
When a trader wants to open a position, the first thing they do is look at the trend of the chart, to identify the "biases" that may be on the chart. This can be done by using the Price Action method; Such as by using the information contained in this article. For an uptrend, it can be composed of price movements composed of: the level of supply and the level of resistance that continues to rise; While for the downtrend, composed of: the level of supply and resistance continues to decline. As shown in the picture below.
When traders see an uptrend, traders will try to identify supply / support levels and wait for prices to touch those levels before opening positions. Conversely, when the price in the downtrend, then the resistance levels that traders will look for.
However, the trend may change at any time. By integrating fundamental aspects of the techniques used by traders, traders can see opportunities to place buy positions at "cheap" prices and place sell positions at "expensive" prices. In short, traders should be able to react to market / price reactions when economic data are released. Traders take a more favorable position than the market's over-reaction.
For example: when a rising trend is seen in the chart, and there is a positive sentiment in the newly released economic data, then the trader will focus entirely on identifying the right level to place the buy position. However, as the trend is rising, and newly released economic results show great negative sentiment, traders should be able to identify the right resistance levels to post sell positions and wait for a breakout of the uptrend going on.
Again, all fixed positions still meet the predetermined requirements of money / risk management.
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