Fundamental VS Technical analysis

by Lin Johnson-Binney

Within all careers, hobbies and sport endeavors, you will see within them so many variations of almost the same thing.

For example, in horse riding you have riders competing within dressage, showjumping, western riding, sprint racing?the list goes on? all of the riders love horses, but each of them stead fast on believing that their specific discipline is the best method and (most often) a better form than the other options available.

This is the same with the two analysis styles of trading; technical and fundamental.

Which one works better?

The answer to that is; whatever works best for you.

Some traders swear by one style or the other, and some settle somewhere in between and find harmonious use of the two.

The difference is that the fundamentalists try to determine the markets future action by considering economic factors like; Political events, Gross National Product, Inflation, Employment figures, even natural disasters.

Whilst Technical analysts determine potential market movements through patterns displayed on charts. Charts display great visual imagery of price movement over time. Historical price is easy to view and factor into their daily analysis.

A great thing is news events which affect the currency market are reflected in the charts almost immediately as the Forex market is open 24 hours allowing traders to react immediately.

Therefore the charts show a very accurate picture of what the masses of market participants are thinking , feeling and reacting, and as humans repeat behaviors, those behaviors reflect through different pattern formations that can become quite predictable.

It is the charts that show us where the actual driving force is through volume and many other indicators, and as markets weaken it is often obvious and the technician has a chance to adopt strategies to change their trading direction and profit from the new trend.

Technical analysis offers traders the ability to ?time? the market ? staying out during consolidation phases and knowing when could be a great entry to a brand new trend.

As technology advances both technical and fundamental analysts increase their competitive edges. There are many tools, indicators, and live news feeds that enable traders to source the highest quality of information for their trading advantage.

Lin's forex trading article was sourced from here.

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