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technical analysis -or- fundamental analysis

  • #21
  • Mar 29, 2009 2:28am Mar 29, 2009 2:28am
Quoting spudbox

I think the blanket term of you have to choose one or the other is incorrect.

I agree. This statement is almost as silly as my hair.
The trend always ends.
  • #22
  • Mar 29, 2009 4:56am Mar 29, 2009 4:56am
Quoting Peglow1
No doubt, you can see the market give hints of the FA prior to announcement. And I agree about divergences, candle formations, etc. I tend to be defenseive prior to a FA. My history proves too much risk at these times and would rather be safe than sorry. Once past FA, TA takes over for me and I get back to following PA.
Agree.

"Buy the rumor, sell the fact,” says Brian F.
Dolan, director of research at
Forex.com. “.. This is also one of the way.
  • #23
  • Mar 29, 2009 8:54am Mar 29, 2009 8:54am
personally MP prefers T+A with a touch of S+M over FA, but tends towards TA and the MACD, while touting the LRC to follow PA !

ENJOY
and trade well

mp


Originally Posted by Peglow1 http://www.forexfactory.com/images/buttons/viewpost.gif
No doubt, you can see the market give hints of the FA prior to announcement. And I agree about divergences, candle formations, etc. I tend to be defenseive prior to a FA. My history proves too much risk at these times and would rather be safe than sorry. Once past FA, TA takes over for me and I get back to following PA
  • #24
  • Apr 21, 2009 9:00pm Apr 21, 2009 9:00pm
I agree with the things shamus and spudbox said that there's no need to separate the two. Forex, like most macro markets, are driven by sentiment. But, both fundamentals and technicals tell you sentiment.

If you look at price after a worse than expected news release and it is higher, it tells you that sentiment is positive. If you see a hammer after a long downtrend, that tells you the same thing. Focus on using the two methods (FA and TA) as tools to analyze sentiment and behavior instead of seeing them as the ultimate solution.

I'm writing a report for a group of trader friends that requested me to write about behavioral analysis for forex trading. I've attached the first part of it and I hope you find it useful. Warning: it might offend some strict technical analysis people, so if you are one of them please just accept it as my viewpoint!

Kris Matthews
Attached File(s)
File Type: pdf Part I Kris Matthews the Gestalt Shift.pdf   330 KB | 1,580 downloads
  • #25
  • Apr 21, 2009 9:43pm Apr 21, 2009 9:43pm
actually theres no battle, the two are supposed to be an entity. thats how charles dow first designed it to be. complimentary to each other.
  • #26
  • Apr 21, 2009 10:21pm Apr 21, 2009 10:21pm
Fundamental analysis is great at determining the direction in which the market will move, but awful at marking the time time in which the market will begin it's move. That's where technical analysis comes into play.

You can certainly be successful using just one or the other, but if you fully understand both disciplines, it makes trading just that much more profitable.
  • #27
  • Apr 27, 2009 7:59am Apr 27, 2009 7:59am
Yes that's true, it's useful to use both, but technical analysis especially leads to many illusions (particularly in the short term) so timing is more difficult than it seems. Technicians who are good at what they are doing (sounds like you are) have a unique model of perceiving and interpreting the market and limit their risk when they are wrong. The fact that they limit their risk means that they accept that they can be wrong. Therefore "timing" (implying consistent prediction) is a misnomer in this case.

Instead of trying to fight randomness by timing the market, one should accept that things appear random in the short term. Therefore it's advisable to give price plenty of room to move around before it follows its true driving force. If you talk to many hedge fund traders who do global macro (the dominant style for currency trading) they will tell you that the currency market (like others) has a very low signal to noise ratio, and thus it's important to not make stops to tight. Don't trust their word-- How many times has price returned back to profit territory after you closed a position for a loss? (I mean the general "you" not specific. Not trying to offend anybody).

Have a fantastic day,

Kris Matthews
  • #28
  • Apr 30, 2009 7:28pm Apr 30, 2009 7:28pm
Forex bounces around so much on the lower TF's, that once you have technical analysis figured down close to the tick's motions, there's not a lot of need for getting fundamental analysis, or news, done; news turns into a timing device for a chart, and provides reason for a move if you need one. Fundamental analysis, to me, plays a much bigger role in stocks, where one news item can make or break an entire chart.
  • #29
  • Apr 30, 2009 7:53pm Apr 30, 2009 7:53pm
Quoting Noloqy
Quoting clockwork71
"There are some traders that rely totally on fundamentals. There are some that rely totally on technical analysis. Then there are some that use both. I tend to use fundamentals only in the sense I know when not to trade."

I really like this statement.
Yah i'm purely a technical trader but i avoid tradinng before major economical news.. other fundamentals i pay attention too is usually the exterme situation like the current flu outbreak.
  • #30
  • Jul 5, 2009 5:01am Jul 5, 2009 5:01am
short term(day trader)=go for technical levels
long term(big investor)=go for fundamentals news.
  • #31
  • Jul 5, 2009 6:49am Jul 5, 2009 6:49am
There is no wrong answer when it comes to this subject matter. Though, it wouldn't hurt your trading/investment strategy to learn and apply both Tech or Fund to your game.
  • #32
  • Oct 14, 2009 10:44pm Oct 14, 2009 10:44pm
so many trainers will say only half truth, most of these people only know the indicators by names, their funtionalities. but the fact of money making in forex, that you and i know is not either of the two, but building a system out of them and test running it again and again until you find confidence in it.

now to build a trading system you must understand that all indicators can be classified into leading and lagging indicator.

therefore, you must build a system that marries the two together , less you are too early into a trade and be caught by a spark or too late into a treand only to push the trend north or south, without making money.

there is no holy grail in forex except for the trader , good money management , discipline and sticking to your simple trading sytem is your holy grail.

dont be one sided , do all in your best to learn how to trade fundementally as a technical trader, or you just stay out of the market during news hour.

it is not a complete truth that you must be either a fundamental or tachnical trader. if you do this you will be robbing yourself of good money, even the more as a fundamental trader, becuase there are days when no news of major currencies will be available.

my sincere advice to you as a trader is marry technical and fundamental trading , have good money management, be discipline and abide with a trading system.
  • #33
  • Dec 3, 2009 5:57am Dec 3, 2009 5:57am
The fundamentalist studies the cause of market movement, while the technician studies the effect.
Whichever you want to follow you should know a little bit of both, at least to make an informed decision
  • #34
  • Feb 19, 2010 8:22pm Feb 19, 2010 8:22pm
one good example is the stock market. U dun just trade technical analysis... If an analyst downgrades, that is fundamentally bad and u would want to sell even though technicals are good.

On the other hand. Technical analysis is good once u know the fundamentals are sound. Then u buy whenever the technical says so.
  • #35
  • Feb 20, 2010 4:52pm Feb 20, 2010 4:52pm
If fundamentals point to probable direction, then price (TA) should confirm it; otherwise the FA was clearly wrong. Personally, I'm more comfortable waiting for the confirmation, even if this introduces some 'lag' into the process.

Look at the attached screenshot of the strength indy. It's obvious that the European currencies are weakening while the CAD (especially) and AUD are strengthening. Undoubtedly there are compelling underlying fundamental reasons for this, but I don't need to know what these are, or how to weigh their complexities up against each other. The daily/weekly/monthly strength charts tell me all I need to know. Technical confirmation, plus the removal of the need to study and understand fundamentals, is a price I'm happy to pay for any 'lag'. If a nation's economy is particularly strong, or weak, for whatever reason, then I don't expect that condition, or at least mass 'expert' perception of it, to U-turn overnight.

Consequently, I can skew the probabilities in my favor by looking for suitable short technical setups in the GBPCAD, for example (second screenshot). The wonderful fact that forex trading involves combining two currencies in a pair intrinsically doubles the likelihood of any trade being successful, if I trade the strongest currency/ies against the weakest.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: fvt1.gif Size: 52 KB
Click to Enlarge Name: fvt2.gif Size: 33 KB
  • #36
  • Jun 19, 2010 10:45am Jun 19, 2010 10:45am
Quoting Sidus
I'm a technical trader. But I use fundamentals to know the big picture of a cross. So a technical trader and a fundamental investor!

What are the best books to read to have a better understanding of trading??

Please let me know, thanks!!
  • #37
  • Edited 1:56am Aug 20, 2010 1:54am | Edited 1:56am
I hate math. I am not so happy with all the technical jargons, so for almost a year now of trading, I have relied to the simplest technical indicator I can lay my hands on....... EMA. In fact I am now only using two, one fast and one not so slow. With fundamentals, I rely on ForexFactory for news and indicators on how these news will affect the market, so far it has been very helpful.

After blowing up almost around 1,000$ of my pocket money, these two indicators have now helped me to slowly, more confidently get back on trading. With my last investment for a micro account of 225$ last 29th July 2010, as of yesterday, 19 Aug 2010, using my EMA and Fundamental strategy, my account is now at 377$, only trading 0.01 - 0.03 lots.

I believe, one can't live without the other, for me at least....

Enjoy your profit - SHARE!
  • #38
  • Dec 2, 2010 2:04pm Dec 2, 2010 2:04pm
Hum, fundamental indicators move the technical indicators.. so.. -_o

I think all those fundamental analyse websites are very complicated,
i'm thinking of making a cyclus of fundamentals that move the market.
But could not find the time yet..
You know, something like high unemployment > low consumption > high pending houses etc .. It's what the market is focussing onto at one moment..

A waterfall cyclus to keep it all clear in your head, so you learn better what to expect in the future and learning from past mistakes, aaight!
Any1 wonna join me on that???
Old Habits Die Hard.
  • #39
  • Dec 24, 2011 4:19am Dec 24, 2011 4:19am
Quoting Shaggy_rock
Hum, fundamental indicators move the technical indicators.. so.. -_o

I think all those fundamental analyse websites are very complicated,
i'm thinking of making a cyclus of fundamentals that move the market.
But could not find the time yet..
You know, something like high unemployment > low consumption > high pending houses etc .. It's what the market is focussing onto at one moment..

A waterfall cyclus to keep it all clear in your head, so you learn better what to expect in the future and learning from past mistakes, aaight!
Any1 wonna...

I've built one, but the problem comes when the market no longer respects conventional economic indicators, like the kind of market currencies have been experiencing lately. So, when economic indicators come out in the U.S. for example that should move the USD higher against most majors, and the USD moves lower on the news release - a fundamental type system gets caught in a trap.

Technical trading is superior, not only by a small margin, but by a wide margin over pure fundamental trading strategies, because you can switch Time Frames as a technical trader, where you cannot as a fundamental trader. The NFP report is the NFP report, regardless of time frame. But, any technical indicator can show you market detail for price behavior across all time spans and thus, becomes far more valuable over the long term.
  • #40
  • Apr 7, 2012 10:27am Apr 7, 2012 10:27am
Quoting shaking it
The fundamentalist studies the cause of market movement, while the technician studies the effect.
Whichever you want to follow you should know a little bit of both, at least to make an informed decision
Agreed, surely the fundamentals inform everything to a certain extent i.e. if we're talking equities if the company is a dog the share price is only going in one direction no matter what the charts are telling you!
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