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Fundamental VS technical

  • #21
  • Nov 24, 2008 1:36pm Nov 24, 2008 1:36pm
Quoting AngelaTrix
Come on guys!!!
This only probes that if you use both analyses you can be unbeatable. The bottom line is: If you can be profitable with fundamental or technical analysis separately. Why are we arguing about which one is the best? Why aren’t we arguing about how to mix them up?

http://www.forexfactory.com/showthre...79#post2373079

http://angelatrix.wordpress.com/2008...eems-far-away/...

Right on As Van Tharpe says, you trade your beliefs in the market, not the market itself. If you believe in fundamentals then you will trade fundamentals. If you believe in T.A then you will trade T.A. If you believe in both, then you will trade both. There is no right or wrong here.
Just Trade It
  • #22
  • Nov 24, 2008 2:26pm Nov 24, 2008 2:26pm
All i know is to make profit FA or TA the fact remain that the banks move the market watch their foot print and follow.
  • #23
  • Nov 24, 2008 2:49pm Nov 24, 2008 2:49pm
Everybody has made a really great points here…well at least in the last three posts.
A good strategy must make you feel good with your trading style.
No matter the structure or what you do, you must feel confident about what you’re doing.
But Angy has made a really good point…we can use both analysis in order to be more profitable.
A recent study has been made about it and it found some interesting facts.

Check this out:
http://expertsmt4.wordpress.com/2008...aims-strategy/

I think this is something a good trader must be able to do.
  • #24
  • Nov 25, 2008 9:51pm Nov 25, 2008 9:51pm
Quoting mayorspread
Check this out:
http://expertsmt4.wordpress.com/2008...aims-strategy/

I think this is something a good trader must be able to do.

Very infomative link, thanks very much mayorspread
  • #25
  • Nov 25, 2008 9:58pm Nov 25, 2008 9:58pm
Though I’ve been told that fundamentals are good for scalping because when the news release the market usually fluctuates a little, I don’t use them much. I find technical analysis much more helpful in this case.
  • #26
  • Nov 27, 2008 10:52am Nov 27, 2008 10:52am
Quoting mayorspread

Check this out:
http://expertsmt4.wordpress.com/2008...aims-strategy/

I think this is something a good trader must be able to do.
I have to thank you mayorspread!
I really like the information you have give me.
I’ll try the strategy but beyond that I think every trader must have this info in mind as the result can affect any other strategy.
At least we need to be aware of this every Thursday.
And again, if we two kinds of tools but we can only use one at the time,
but we have great results with both of them for separately,
why don’t we create a new tool mixing the characteristics of the others?
  • #27
  • Edited 8:11pm Nov 28, 2008 7:45pm | Edited 8:11pm
Quoting Gaston
You are missing the key concept that is being argued. The quote "technicals are a graphical representation of fundamentals" is not in question (hence me restating it), and that is where you are confused. The debate lies in the source of information a trader wishes to base decisions on.

Here are the two extremes of the arguments.

FA)
"Funamental factors move price, so why should we look at anything else". This argument implies that the market moves solely through fundamental factors. If this was true, then any time price "bounces"...
Hi everyone,

After i read this article,and i want to write something here,Can i make an example to explain the effective what Fundamental and Technical work in the world-wide circumstance!!

Let's suppose that the world-wide circumstance is a big tree(currency) grows in a complex environment, and fundamental factors are the active and feelingable object and climate which effect the growing of the tree.

Such objects like a hammer or any other things bump or hit to the tree,and if the tree is big enough or strong, it will be only a slight hurt on the tree like a flat concave. but if a hammer bump times consecutively or if the tree is small or weak, it will be deform or destroy or some sticks would be cut down, at the same time you can image that if another object effect to the tree such as a strong rope with enough strength to pull on it,what would happen? this is call Fundamental.

On the other hand, what is Technical? the Technical is contour of the tree growing,after the hiting from a small hammer,the big trend of the tree growing has not changed.but if we come closely to see the detail of where it has be hit, actually, some micro scale has been changed.

In conclusion,Fundamental and Technical are not the same concept,but they interact closely, and the effect just depend on what,where,how you want to concern!!!
  • #28
  • Nov 28, 2008 10:41pm Nov 28, 2008 10:41pm
Quoting davic_lee
Hi everyone,

After i read this article,and i want to write something here,Can i make an example to explain the effective what Fundamental and Technical work in the world-wide circumstance!!

Let's suppose that the world-wide circumstance is a big tree(currency) grows in a complex environment, and fundamental factors are the active and feelingable object and climate which effect the growing of the tree.

Such objects like a hammer or any other things bump or hit to the tree,and if the tree is big enough or strong, it will be only a slight hurt...

Dont try too hard here dude. It seems that English is not your primary language (at least I hope not), but it seems like you are trying to create an analogy about how markets are influenced by fundamental and technical data. Instead of trying to create some complicated metaphor to mirror market reaction to such information, just use the damn market as your foundation! Is the market really like a tree thats getting hit by a hammer? Or is it simply, I dunno, like a mass group of people all making bad decisions about where price should be... and then these bad decisions are plotted somewhere, let say on a chart, then we all try and look at this "chart" and see how these "events" and "formations" influence how this chart-like picture moves... Thats more what it looks like to me...

Anywho, I really don't want to burst your bubble , but sometimes people come up with the craziest stories of how markets are mirrored by the most random situations of life. I always picture some hippie in a van saying something like, "a market is like a highway and we are all just driving down the road of life blah blah blah..."

I say a market is like a market. If nothing else, that thought process has fewer inefficiencies.
Headline: USD drops due to news of USD dropping!
  • #29
  • Nov 28, 2008 11:21pm Nov 28, 2008 11:21pm
Quoting Gaston
Dont try too hard here dude. It seems that English is not your primary language (at least I hope not), but it seems like you are trying to create an analogy about how markets are influenced by fundamental and technical data. Instead of trying to create some complicated metaphor to mirror market reaction to such information, just use the damn market as your foundation! Is the market really like a tree thats getting hit by a hammer? Or is it simply, I dunno, like a mass group of people all making bad decisions about where price should be... and then...
Hi Gaston,

As you said, English is not my primary language, I am from China, but i do think what i wrote you will understand, right?

haha, what you described is reasonable, but you may mistake my meaning. in my prior article, "tree" not means "market" but just "one type of currency". In my head, "market" is including all types of forex...

In the short future,I will move to a primary English speaking country and working for a living. after your words, I should go ahead with English now....

thank you for your remind....
  • #30
  • Nov 29, 2008 2:50am Nov 29, 2008 2:50am
I think you need a mix of both to survive.
  • #31
  • Dec 2, 2008 10:29am Dec 2, 2008 10:29am
I'm a newbie but have been reading voraciously and watching all sorts of webinars in the past week and am a Systems Analyst by trade (not in the financial industry).

My two cents to this topic would be that the importance of technical (charts) versus fundemental (news and economic indicators) really depends on the timeframe you are analyzing.

Yes banks move markets, even on a daily basis, but essentially, in my opinion, that is still a technical analysis of price action and order flow.

When you get into longer timeframes such as week and month charts, I think the fundamental analysis becomes much more important. What technical analysis would have predicted the Euro going from 1.6 to 1.25 in the past months? None that I know of. That change is primarily due to fundamental changed in the world economy, not due to patterns you could see in a monthly period chart prior to the move.

If you are a scalper/day trader, I would say fundamental analysis is 95% irrelevant except for keeping major news event that could effect the pair you are trading in mind. You may want to sit out of the market on those days.

Someone who is trading long-term, like maybe on average 2 trades a month, I think is maybe going to use a mix, of about 50/50 to 70/30 Fundamental/Technical analysis - that's just my guess being a newbie but also an Analyst by trade.
  • #32
  • Dec 2, 2008 11:11am Dec 2, 2008 11:11am
Well I'm looking at my first large floating loss. My technical analysis was saying Sell EUR/USD yesterday, and then this morning the stock market rebounds (like I expected) and EUR/USD is up (but outlooks expect it to re-test the 1.23-1.24 range) so this should be temporary, at least in the short term.

My point is, after a 7+% loss in the market yesterday, my gut fundemental analysis was telling me to Buy EUR/USD, but the technical (at least for a timeframe of the next 2-5 days) was saying Sell.

So this might be an example where fundamental analsysis (expectation in a rebound in the stock market) does play a role in short timeframe trading?
  • #33
  • Dec 2, 2008 11:49am Dec 2, 2008 11:49am
Fundie analysis is a crock. When it comes to forex the only aspect of it that matters is cash flow. Is money flowing into the dollar or away from the dollar?

Well the answer is really simple, with markets down all over the place ppl buy quality. That means reserve currencies like the dollar and the euro, altho more dollar than euro. So when the market goes down, ppl buy dollars (right now atleast) and when the market goes up, people sell their dollars to buy into the markets.

So much money has been lost preaching value and fundamentals. There's no need to play up all of this voodoo nonsense. Why make trading so dang difficult?

2 days ago the EURUSD drove down. Yesterday trading at the low failed to bring in enough new ppl for a repeat performance, so you got a slow crawling range. Earlier today, trading at yesterday's low failed to bring in enough dollar buyers to repeat even that, so it rallied. Why weren't there any dollar buyers? Because they saw the DOW/S&P about to rally and figured they'd buy that instead.

There's support at 1.2675 and 1.2770 at the moment. Watch price's behavior there for now and it'll tell you which way the market wants to trade. Just like if you had watched yesterday's low you could've predicted today's rally.
  • #34
  • Dec 2, 2008 12:20pm Dec 2, 2008 12:20pm
Quoting Rabid
Because they saw the DOW/S&P about to rally and figured they'd buy that instead.
But isn't money flow a result of a fundamental change in this case you are using? The stock market went up. People saw that and sold dollars.

I thought technical was just analyzing charts. The people, as you said, that "saw the DOW/S&P about to rally" didn't make their decision on technical analysis of charts.

I agree money flow is the key, but saying "this line and that indicator and this line on my 1H EUR/USD chart was predicting a EUR/USD rally" is a lot different than saying "Because they saw the DOW/S&P about to rally" I'd say the first one is a technical analysis and the latter is a fundamental indicator/analysis. Now if you can explain how you would go about looking at the currency pair via technical analysis that reliably would predict a rally due to money flow that always coincides with the stock market about to rally, then you could correlate people reacting to the stock market with technical analysis.

Otherwise I'd say looking at sentiment based on the performance of the stock market is fundamental, not technical. But that's a newbie's opinion. My ears are open.
  • #35
  • Dec 2, 2008 12:52pm Dec 2, 2008 12:52pm
Quote
But isn't money flow a result of a fundamental change in this case you are using? The stock market went up. People saw that and sold dollars.

I guess it depends on how you draw the line. I see fundamentals as stuff like GDP and jobs reports and trade balances, etc. Each of those effects cash flow to some degree, and in that they have an effect, but other than immediate news trading... the impact of those things are fairly random. You can have a great GDP result, but the market priced-in something better, and end up with a massive negative response on seemingly good news.

Quote
I thought technical was just analyzing charts. The people, as you said, that "saw the DOW/S&P about to rally" didn't make their decision on technical analysis of charts.

The DOW/S&P correlation is part fundamental I guess, but it's largely technical, and it's fundamental aspect is only important as far as it effects cash flow. Still, the move itself is just TA w/ additional charts. Add in an S&P chart and the range is clear, people trade that range and the correlation effects exchange rates.

Quote
I agree money flow is the key, but saying "this line and that indicator and this line on my 1H EUR/USD chart was predicting a EUR/USD rally" is a lot different than saying "Because they saw the DOW/S&P about to rally"

Not at all. The S&P rallied because it was at the bottom of an S&R range. Granted you can't pull up that info on a EURUSD chart, but if you pull up an S&P chart you certainly can. With tightly correlating markets like these you have to extend your TA a bit.

Personally I'm not a fan of the term "technical analysis" at all. It has come to mean indicator analysis, and that's usually what people do. Even basic S&R is usually reduced to an indicator, or just a line on a screen. I prefer "market analysis" as better a term.

In that I don't think direct fundamentals play a huge role in the day to day market operations, with some exceptions made for news trading. Instead it seems that fundamentals play out their hand thru the flow of cash into and out of currencies, and that flow sets the underlying tone or trend of the market. That underlying tone can then be traded around or traded directly, depending on your strategy. And altho the tone always wins in the end, any given day is subject to the whims of the market. Today's EURUSD motion is a classic technical pattern.

Anyway...

At some point when the market rallies enough the current correlation will unwind. Equities rally, people sell dollars, the dollar will lose value, people buy more equities, the market will rebound, and the dollar will rally back as people invest in US-based business again (sell native currency, buy dollars, build factory, repeat). It's all just phases of the financial moon.

Quote
Otherwise I'd say looking at sentiment based on the performance of the stock market is fundamental, not technical. But that's a newbie's opinion. My ears are open.

When a market is trading in a range between 2 clearly defined points, as it is now, how can sentiment be fundamental? It's entirely based on a technical agreement of value between buyers and sellers. Granted that's not entirely forex TA, but it's TA none-the-less.
  • #36
  • Dec 2, 2008 11:43pm Dec 2, 2008 11:43pm
Lets clear a few things up here. Rabid, I am going to use your post as an example, even though your reply is among the more thought out ones in this thread. I am just trying to offer a different mindset that may allow a trader to understand more clearly the dynamics of price discovery.

Quoting Rabid
I guess it depends on how you draw the line. I see fundamentals as stuff like GDP and jobs reports and trade balances, etc. Each of those effects cash flow to some degree, and in that they have an effect, but other than immediate news trading... the impact of those things are fairly random. You can have a great GDP result, but the market priced-in something better, and end up with a massive negative response on seemingly good news.
Fundamental analysis is the study of what is happening in the world. This is more than what is on the FF news board. This includes what you wrote above Rabid, plus a whole hellofalot more.

Quote
Not at all. The S&P rallied because it was at the bottom of an S&R range. Granted you can't pull up that info on a EURUSD chart, but if you pull up an S&P chart you certainly can. With tightly correlating markets like these you have to extend your TA a bit.
I will make my main point here.

Price does not not rally because it was at the bottom of a range. In fact, price does not "do" anything. It merely reflects human behavior. It helps me to humanize the market, give it psychological tendencies, and put people behind the movement of price. Either way, you must think in terms of supply and demand. Ranges exist because of a fight between bulls and bears; buyers and sellers. When a range hits the bottom, then bounces, it did so as a reaction to buyers entering the markets overcoming the sellers. It is not the "range" or "S/R" that caused the sellers to be bought. It is the buyers that bought out the sellers, thus forming the bottom of this range. The range then becomes a product of supply and demand. It shows a historical battle of two sides.

Now, there is a good chance that there were a great many people who saw the support and a range forming, and therefore decided to buy at the bottom of it. This is technical analysis, and it shows some nature of psychology in the markets. Technical traders can easily justify entering the market at the bottom of a range, however, to be able to stop the downward movement, buy up all of the sellers, and reverse supply and demand takes incredible orderflow, much of which technical traders cannot account for. Just a hint, who do you think benefits from the widespread assumption that technical information holds enough weight to be considered a superior cause of market movement? I wonder. Now, I am sure there are times that sole technical analysis can move markets in areas like this, but I believe those times are few and far between.

So, if technical traders are not often responsible for the reversals of market direction, then perhaps the data on a chart does not carry as much weight as we often assume. Or at the least, maybe we are thinking too concretely about how important a support or resistance line is.

Quote
Personally I'm not a fan of the term "technical analysis" at all. It has come to mean indicator analysis, and that's usually what people do. Even basic S&R is usually reduced to an indicator, or just a line on a screen. I prefer "market analysis" as better a term.
Technical analysis is the study of what is happening on a chart. However distorted you make it (ie with indicators), it is still technical analysis.


Quote
At some point when the market rallies enough the current correlation will unwind. Equities rally, people sell dollars, the dollar will lose value, people buy more equities, the market will rebound, and the dollar will rally back as people invest in US-based business again (sell native currency, buy dollars, build factory, repeat). It's all just phases of the financial moon.
Again, it is just shifts of supply and demand. In order to capitalize on supply and demand shifts, if would benefit you to not think inside of technical and fundamental boxes (my point way back at the beginning of the thread). Instead, ask yourself who exactly has the power to shift supply and demand. And then, what reason would they have to make such a shift anyway? Kudos to anyone in this thread who can answer those questions correctly.
Headline: USD drops due to news of USD dropping!
  • #37
  • Dec 3, 2008 1:49am Dec 3, 2008 1:49am
Quoting Gaston
...what reason would they have to make such a shift anyway? Kudos to anyone in this thread who can answer those questions correctly.
This hits the nail on the head as far as my initial understanding on the dynamics of the currency market.

The price action analysis amounts to, what I've read/watched so far, a matter of "candlestick counting" for lack of a better term. But for many individuals, I would guess that's way too primitive/simple of a method. To make money, it's got to be more complex/harder to figure out than that! Right? .... Really? Wouldn't that take the "fun/mystery" out of the game so to speak in being able to play with charts and various indicators. Sort of the same, at least in my observation of hundreds of posts in forums, as Day Traders that would be bored if they were Swing Traders even if in the long run they made as much if not more money. It's too boring/simple/slow.

What I find interesting is that that I can find information on price action trading systems in the form of candlestick counting techniques. But I have yet to find much information as to what methods the market movers (large commercial or governmental financial bodies) are using to make their buy/sell decisions. Is it a big secret, because if it isn't why don't the small players just examine the same data? What major piece of data are the small players missing? VOLUME? Yet to be announced major economic date? I don't know. Although the methods of the big players are essentially irrelevant as long as their is some consistency to the candlestick patterns their actions produce, it still would be of interest to me to learn about it. I'm sure all of the big players more or less use the same data and analysis systems to base their buy/sell decisions.

But for us tiny players, all we can do is count candlesticks and hope more often than not, the patterns correlate with what the big players are doing or about to do.

This is the thoughts of a total newbie. But sometimes the freshest perspective is just that, fresh. I have much time to find out if my theories hold any water.
  • #38
  • Dec 3, 2008 5:19am Dec 3, 2008 5:19am
I trade completely and strictly tech. I like to trade naked bar chart with some channels and lines to outline the price patterns drawn. Keeping it completely simple and so it describes the current market conditions precisely.
  • #39
  • Dec 3, 2008 3:15pm Dec 3, 2008 3:15pm
Quoting Mr. KISS
But I have yet to find much information as to what methods the market movers (large commercial or governmental financial bodies) are using to make their buy/sell decisions. Is it a big secret, because if it isn't why don't the small players just examine the same data? What major piece of data are the small players missing? VOLUME? Yet to be announced major economic date?

youve pretty much hit it on the head lol. they get breaking economic data froma floor analyst and then get a general direction and try to get the best price possible and then get out as soon as possible so they can do it again. (this is from talking to traders that work for a couple of big banks.)
  • #40
  • Dec 3, 2008 3:43pm Dec 3, 2008 3:43pm
Quote
Price does not not rally because it was at the bottom of a range. In fact, price does not "do" anything. It merely reflects human behavior. It helps me to humanize the market, give it psychological tendencies, and put people behind the movement of price. Either way, you must think in terms of supply and demand. Ranges exist because of a fight between bulls and bears; buyers and sellers. When a range hits the bottom, then bounces, it did so as a reaction to buyers entering the markets overcoming the sellers. It is not the "range" or "S/R" that...

Symantics, sure price reflects human behavior. But humans buy at the support level because it's held as support. Well actually humans put buy orders in at support, and computers w/ pre-set buy limit orders do the actual buying, but you get the idea.

Many of the people buying at that point were sellers at the top, so it's more of a conversion of traders to a buying mentality. Still, the end result is the same. Because a large number of orders are placed in a particular area, an area set up by past trading behavior, you get what people call "support and resistance." The mechanics of S/R boil down to where people have their trades placed.

That's why learning to read price tests are so important. Sometimes price will trade outside of the range for a bit and test to see if there's enough support to keep the move going. If there is, a trend develops. If there isn't, it falls back into the range after the failed range extension.

Quote
So, if technical traders are not often responsible for the reversals of market direction, then perhaps the data on a chart does not carry as much weight as we often assume. Or at the least, maybe we are thinking too concretely about how important a support or resistance line is.

Laff. So the fact that the current placement of both the EURUSD and the GBPUSD matches perfectly to a retracement level is just... Or that the S&P has found support where it is... Or that people were able to predict, using technical analysis, the current level of the DOW and the range that's formed around 8000 is...? It's just a retracement level, pull up the chart and see for yourself.

You'll find if you look at these movements that more often than not a reversal occurs in very predictable spots.

Now that's not to say the retrace will hold, we don't know. Once price reaches a level like this people have to decide whether the level well break or hold. If it breaks it'll fall to the next one, and make the same decision again.

Quote
Again, it is just shifts of supply and demand. In order to capitalize on supply and demand shifts, if would benefit you to not think inside of technical and fundamental boxes (my point way back at the beginning of the thread). Instead, ask yourself who exactly has the power to shift supply and demand. And then, what reason would they have to make such a shift anyway? Kudos to anyone in this thread who can answer those questions correctly.

Of course, but these shifts of supply and demand occur for a reason. Some times those are purely technical reasons. Either way, we can use TA to read changes in supply and demand. I agree that it helps to go past price and look at order flow, I'd say that's probably even necessary to be consistently profitable, but TA can help you do this.

Anyway, I already answered those questions, lol. Large funds and gov't agencies in a flight to quality. Hence the whole "cash flow" thing. Cash flow sets the high order tones of the market and creates trends. But many of these large institutions have to spread their buys/sells into traunches and take the trades thru the day as liquidity permits. This usually makes them responsive, rather than initiating. If I had long term positions to hold I certainly wouldn't be selling into the daily low, for example.
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