Forex

Fundamental and technical analysis on forex

Fundamental and technical analysis on forex

Most newcomers who come to trade on Forex are asked “What is more effective than fundamental or technical analysis ?

This question is not entirely correct, since these methods of analyzing the currency market are designed to solve the same task, namely, to obtain data for the subsequent forecast.

Moreover, technical and fundamental analysis are strongly linked, since any changes on the currency pair chart occur just under the influence of fundamental factors, and those analyzes only allow you to track the history of price movement and to identify possible patterns.

The principles on which this or that kind of market research is conducted differ slightly, for example, the technicians are sure that the price includes everything and the reason for changing the trend is not necessarily to know, but the fundamentalists make their conclusions solely on observations and logical constructions.

At first glance, it seems that the fundamental analysis is more effective because it is he who first signals the change in the factors influencing the exchange rates. But, as practice shows most of the supporters of trade on the news are beginning traders.

Professionals with great experience rarely use this strategy because the trend does not always adequately react to the news, and sometimes does not react at all. In addition, most of the news is not available to the attention of the general public and does not go beyond the exchanges or offices of politicians and it remains only to guess the real reason for this or that jump in the course.

Unlike the fundamental, technical analysis is more accurate, since it takes into account the already realized reaction of the price and not the possible consequences of any event. In addition, analyzing the chart of a currency pair, you can get much more useful information than when conducting a fundamental analysis. The reason for this situation lies in the same availability and incompleteness of data.

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