• June 14, 2016

Technical analysis VS Fundamental analysis

There has always been a fight between the traders to find which analysis is the best. “Should I emphasize on technical analysis or should stick to my fundamental analysis report?” It seems to be million dollar question. Don’t worry we will clarify which analysis is the best .Both “technical and fundamental analysis” is required to trade the forex market successfully. Technical analysis is the complement of fundamental analysis and vice versa.

Technical analysis: The study of price raw price data along with support and resistance level, use of different kind of indicators to find the next possible move of the pair is known as technical analysis. Traders use technical approach to spotting the potential “entry and exit point” of a trade. Different chart patterns like head and shoulder, triple top, double bottom are some of the highly reliable chart patterns used by a technical analyst for taking the trade. Potential stop loss and take profit area can also be identified by support and resistance level of the market through proper technical analysis. Some trader also uses indicators and oscillators to filter the false signal and spike.

Fundamental analysis: Fundamental analysis is based on the economic news release. Traders analyze different major economic news of a currency pair and gauge the strength and weakness of the pair. Trend change occurs in the forex market when major any major economic news is released. “The interest rate, minimum bid rate” etc. are one the major economic data release strong enough to wash away support and resistance level in a second. “Professional short time traders trades on news and make quick cash from the volatility created in a news event.”

The best trading result can be achieved by combining the technical analysis and fundamental analysis. The confluence of both types of analysis leads to the generation stable and high-quality signals. However, some technical traders totally ignore the fundamental analysis of the forex market. They solely depend on of price action and chart data. But in forex, there is a term “History repeat itself”. Professional technical traders make the profit from the reoccurring chart pattern and price movements. On the contrary, the trader who uses the news to trade the pair is often known as scalpers. They enter into a trade right after the major news event. They use tight stop loss while trading the news. “News trading can be extremely profitable if executed successfully.”

Now in today’s modern world traders are way smarter than before. They know how to filter out the best trade from the market. All the traders are now trading the forex market with technical and fundamental analysis report. If both of them generate the same signal than they take the trade. Or else nothing is executed in the market. Technical traders now know the timing of the major economic news release to save their trade from false spike and make maximum profit. On the contrary fundament traders also knows something big is going to happen in the market since the economic data is either over valued or undervalued. Regardless of technical analysis and fundamental analysis, it’s almost certain that every single person who wants to be a professional trader must have proper money management skill. This skill is even more important than the technical and fundamental analysis.