FAQ What is Technical and Fundamental Analysis?

[solid2222]

That is to say, that all factors which have an effect on the price have already been considered by the market and are thus reflected in the price.

 

[arigoldman]

Different people use different approaches to markets, someone might tell you that fundamentals are the key, another will tell you that technicals are the key, don't listen to either one. Devise your own strategy.

 

[owen88]

How can we combine TA & FA in trading? Support with FA, we know the price would go up but TA tell the opposite, how do we decide?

 

[IFeelFree]

How can we combine TA & FA in trading? Support with FA, we know the price would go up but TA tell the opposite, how do we decide?

TA short term. FA long term.

 

[IFeelFree]

That is to say, that all factors which have an effect on the price have already been considered by the market and are thus reflected in the price.

However, many factors have an influence on price that is limited in duration. Such factors ("shocks") can move prices away from equilibrium. One way of trading is to bet on a return to equilibrium. This is the approach of statistical arbitrage, which is what I use.

 

[alexaherself]

FA long term ...

Or exactly the opposite, of course, if you're thinking of entering a forex trade at about 1.25 (UK time) on the first Friday of the month, with the US's NFP figures announcement coming up 5 minutes later, and wisely decide to wait 10 minutes before doing so.

 

[Uranus]

Technical is speculating off historical data. Whether it be patterns, indicators, or some other form of analysis that evaluates historical data.

Fundamental is speculating off future predictions. A fundamentalist would buy wheat futures predicting the price will rise because of higher than average rainfall, or short a currency because of some political influence.

 

[alexaherself]

A fundamentalist would buy wheat futures predicting the price will rise because of higher than average rainfall

It could be argued that in practice, that also tends to be based, at least to some extent, on historical experience: typically she wouldn't do that, if higher-than-average rainfall, historically, had usually been followed by a fall in the price of wheat. Both TA and fundamental parameters involve an assessment (whether analytical or intuitive) of the probability of previous and/or current events influencing future developments, and in either case price movements are caused by imbalances between buying and selling pressure.

 

[arigoldman]

Yes, but fundamental effects do not last long.

 

[annie_cavely]

Excuse me, can you give me some information of market sentiment analysis ?

 

[radex78]

How can we combine TA & FA in trading? Support with FA, we know the price would go up but TA tell the opposite, how do we decide?

Eventually will back to your decision, whether will hold your hand and not open trades , or will enforced to open trades based on your analysis, some trader that based on technical anlaysis they will not trade on news high impact because they have reason technical analysis can't work on these time often making price move randomly

 

[eddy16]

Fundamental analysis is an approach in which one calculates the value on the basis of economic reports and statistics. On the other hand Technical analysis investments are evaluated on the basis of charts, trends and trading volumes over the time. Fundamental analysis is used by long term traders for holding position days, weeks or even months whereas technical analysis is short-term methodology used to take position for days, minutes or even seconds.
The Best Approach of investing is combination of both Fundamental and Technical analysis.

 

[liam.harper]

Technical analysis means trading or forming a strategy on the basis of historical price movements, shape of candles. It involves pattern recognition on the price chart. On the other hand, fundamental analysis involves taking into consideration economic factors and assessing them to the best advantage. Fundamental analysis involves reviewing the economic & political factors that affect the currency movement. However the best trading strategy can be form by combination of both the trading styles.

 

[s.taylor]

I also agree with the previous comment that the best trading strategy can be form by the combination of both the technical & fundamental analysis. Both have their own relevance and any one of them can’t be ignored.

 

[JimTatus]

Fundamental analysis:
Trade the market based on Geo-Politics, economic situations and news releases comes under Fundamental analysis.

Technical analysis:
Trade the market based on indicators, charts and candlesticks comes under Technical analysis.

 

[hedgedequity]

Fundamental Analysis practitioners tend to focus on economics, for eg, company economics in the case of equities speculators or national and international economics in the case of currency speculators. The equities camp study things like company debts, earnings and cash flow whereas the forex camp study things like inflation, interest rates, GDP growth and trade balance sheets, etc. All of these economic indicators helps to determine the value an instrument such as a specific stock or a currency pair (for eg, Vodafone is an instrument in the UK equities market and $USD/$GBP is an instrument in the Forex market) in order to find out the future prospects. If a share or currency looks cheap in the present day and all the indicators are suggestive of the fact that it would be more valuable in the future then Fundamental Analysis practitioners would definitely buy it.

 

[Quantt]

Technical analysis - easier to automate compare to Fundamental analysis...

 

[hatemypips]

Basically, you invest based on fundamental analysis but trade on technical analysis. The best way to get an idea of market trend is to use past price movement analyses.

Yeah that's great insight, I think fundamental analysis is more applicable to long-term trading, while technical analysis help to spot the trend at it's initial stage.

 

[hatemypips]

Technical analysis - easier to automate compare to Fundamental analysis...

Easy to automate - easy to lose. Know what you're automating, if its about drawing bollinger bands and placing trade then it's not a good idea

 

[manover]

The long answer post in first page was very nice to read. Very insightful and informative.