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Fundamental vs Technical

An everlasting question - what is better?

Fundamental vs Technical analyses - what is better?

When starting to trade, a ‘rookie’ might question what is the one best trading strategy or method that will inevitably bring financial success. One is likely to try a dozen of ‘best’ strategies before finally finding the one that works for him/her. However, the one question, that we see more frequently than others is what is better to use: fundamental analysis or technical, when it comes to decision making? Here we will try to explain both approaches and solve the dispute once and for all.

First of all, it is important to understand what is meant by fundamental and technical analyses. Fundamental analysis encompasses the fundamental, or ultimately the basal factors that have the power to determine the price of an asset. These can be the company related financial reports that determine the price of a certain stock, political or economical news affecting the country’s currency or natural factors affecting the crops, as the typical examples.

On the other hand, technical analysis seeks to discover some patterns in an asset’s movement, therefore predicting what the behavior is likely to be in the near future. Technical analysis is not represented by a single approach, but rather by a vast group of methods, all having different pros and cons. We shall not delve into the specifics, as it is a topic for another time that one should, perhaps, discover for oneself.

So, what should be the main or the most robust approach be like – the use of fundamental analysis or technical? To put it simply, the answer lies in the middle, as both have their place and time to be used. As the name suggests, fundamental analysis is able to predict the general climate of an asset, therefore showing the greater picture of what is likely to be happening and how the asset should be perceived by the majority of market participants. Yet, a more specific behavior is predicted well by the use of technical analysis, as it allows to not only see what the asset’s behavior is when the, market’s reaction to a fundamental factor burns out, but also what the optimal point of entry is likely to be, as well as the point of exit.

However, when considering what to look at primarily, there is a simple rule-of-thumb: fundamental factors can break any technical analysis. This is true because fundamental analysis determines the general direction, whilst technical analysis answers a more specific question of the optimal point of entry. This being said, one should take into consideration both of the approaches when making a decision of what to should be important and neither one should be ignored.

In order to skillfully apply this principle, one shall firstly check the fundamentals and if no substantial fundamental factor is likely to have an effect on the asset, then find the optimal trading signal by the use of technical analysis. Although it seems quite straight forward, for an unexperienced trader this might be rather puzzling as where exactly to start and what to look for. That is why we are able to provide tuition, online as webinars and offline in our representative and partners’ offices. Thanks to the well-structured program, it allows the beginners to quickly grasp the necessary basics and start making profit with trading! Furthermore, our contest accounts are specifically designed to give the newcomers a chance to earn additionally whilst progressively learning.