Fundamentals, Technical or Both? | Forex Factory

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Fundamentals, Technical or Both?

  • #1
  • First Post: Dec 16, 2011 9:06am Dec 16, 2011 9:06am
Hi guys, I read an article somewhere before which says that fundamentals does not affect short term trading and some higher time frame traders (1 hour, 4 hours, daily chart...etc) trade solely on technical and has achieve great success? And vice versa, some just trade purely based on fundamentals and have great success too.


Is it possible to just trade based on technical or just solely on fundamentals or is it better to have both?
  • #2
  • Dec 18, 2011 12:31am Dec 18, 2011 12:31am
Quoting dvc11
Hi guys, I read an article somewhere before which says that fundamentals does not affect short term trading and some higher time frame traders (1 hour, 4 hours, daily chart...etc) trade solely on technical and has achieve great success? And vice versa, some just trade purely based on fundamentals and have great success too.


Is it possible to just trade based on technical or just solely on fundamentals or is it better to have both?
Some people would only recommend to trade off pure technical. Other people would only recommend fundamental analysis. Although, with forex you will find many more technical analysts than fundamental traders.

With stock traders you can find a lot more fundamental analysts since there are hundreds and thousands of stocks to analyze. With forex there are only 10-20 different currencies maximum. Which is the reason people on the forums are big on the technicals and the charts.

In reality the market doesn't care about technicals or fundamentals. It cares about what generates orders and transaction flow.

Which is why if you want to mesh the technical/fundamental analysis together, or go find something new that can be much more refreshing and enlightening, then I would recommend order flow trading and global macro trading.

For there are times when technicals fail, and times when fundamentals fail. But order flow and liquidity never fail.

What fails is traders interpretation of the market environment and their own trade structures.
Private message me for a link to my order flow website.
  • #3
  • Dec 18, 2011 5:06pm Dec 18, 2011 5:06pm
Quoting dvc11
Hi guys, I read an article somewhere before which says that fundamentals does not affect short term trading
They can, and in some very dramatic ways - as many people who have tried trading unknowingly at times of major economic announcements have discovered to their cost.

Quoting dvc11
Is it possible to just trade based on technical or just solely on fundamentals or is it better to have both?
It's possible to trade profitably only on fundamentals.

It's possible to trade profitably almost only on technical analysis, but with awareness of the timing of economic announcements etc., so as to avoid trading at those few highly dangerous times when fundamentals can briefly overwhelm all technical analysis parameters.
  • #4
  • Dec 19, 2011 2:33am Dec 19, 2011 2:33am
there is only one market, one time frame.

people try to cut it into pieces or sectors, that don't exist

some talk of time frames like they were independent and unrelated, to me that is absurd.

technicals are king, fundamentals are king i hear both camps, their point of view, and reasoning for their preference on either is specious.

if you buy the euro/usd you ipso facto have a position now, not on an independent one minute, tick, monthly or daily chart not on fundamental currency or technical currency..............it is one and the same, you bought x euros at y price. period.

do this experiment, generate a chart of your income, or expenses. You will see some fluctuations, yes some times you spend more than other times per pay period, and that will be reflected on the chart. Can you predict how much you will spend by using your chart.............yes to an extend it shows objectively the influx of money and spending habits. Can you predict that a bonus will affect your expense chart..........yes to an extend you can predict that changes in cash flow will alter your habits.

now you lose your job..............they both fail. There was no way you could have predicted that.........to a certain extent there are factors that could have been foreseeable had you known your companies health, etc....but some things are simply random.

this is my rough hypothesis on the matter, so to answer your question, to trade solely on one is to be blinded. fundamental factors affect the economic conditions, the reasons for money flow, technicals are objectively laid out as a record of money flow. By the way time frames are nothing but measure of movement of this money flow by x amount of time.
AVT INVENIAM VIAM AVT FACIAM
  • #5
  • Dec 19, 2011 4:06am Dec 19, 2011 4:06am
I prefer to both Fundamentals and Technical. Because Fundamentals and Technical separately did not work well for me. So now I am preferring to both.
  • #6
  • Dec 19, 2011 8:55am Dec 19, 2011 8:55am
Quoting henryduncan1
I prefer to both Fundamentals and Technical. Because Fundamentals and Technical separately did not work well for me. So now I am preferring to both.
Everyone I talk to says that trading fundamentals in FX will kill you.
  • #7
  • Dec 20, 2011 3:47am Dec 20, 2011 3:47am
Quoting fxstevyboy
Everyone I talk to says that trading fundamentals in FX will kill you.
Can you share reason behind it. Why people say it will kill me in trading?
  • #8
  • Dec 21, 2011 3:14am Dec 21, 2011 3:14am
Quoting dvc11
Hi guys, I read an article somewhere before which says that fundamentals does not affect short term trading and some higher time frame traders (1 hour, 4 hours, daily chart...etc) trade solely on technical and has achieve great success? And vice versa, some just trade purely based on fundamentals and have great success too.


Is it possible to just trade based on technical or just solely on fundamentals or is it better to have both?
I think that the general trend is basically influenced by the fundamental events. However, the financial market do not always go along with the fundamental situation. We have seen the stocks rising in spite the debt problem of important countries. In the short-term, I believe it’s a combination of technical and the moves of the institutional. Obviously, surprising news or catastrophe will have the highest impact on the market.
  • #9
  • Dec 21, 2011 4:23am Dec 21, 2011 4:23am
Quoting AlejandroFX
I think that the general trend is basically influenced by the fundamental events. However, the financial market do not always go along with the fundamental situation. We have seen the stocks rising in spite the debt problem of important countries. In the short-term, I believe it’s a combination of technical and the moves of the institutional. Obviously, surprising news or catastrophe will have the highest impact on the market.
I am completely agree with your this sentence "surprising news or catastrophe will have the highest impact on the market." When Financial credit of America went down then market suddenly go to earth. It shows that surprising news put highest impact on market.
  • #10
  • Dec 21, 2011 4:49am Dec 21, 2011 4:49am
I trade very long term based almost entirely on technicals - when I enter a trade my aim is to stay in it for 6 months to a year or more and catch major trends. I only use fundamentals very sparingly to choose the best pair to trade - if USD/JPY and EUR/JPY have the same technical traits I look for but I only want to trade one, I will use fundamental analysis as a last resort to choose one over the other.
si hoc legere scis nimium eruditionis habes
  • #11
  • Dec 21, 2011 5:02am Dec 21, 2011 5:02am
Quoting dvc11
Is it possible to just trade based on technical or just solely on fundamentals or is it better to have both?
Sure it's possible. But you get an increased chance of getting screwed. Trade math, miss high-impact news, and you're out. Trade fundamentals, miss a massive momentum move, and you're dead.
  • #12
  • Jan 6, 2012 1:33am Jan 6, 2012 1:33am
I always go with technical in Metals,energies & bullions, but sometimes go with fundamentals in Agro commodities, with repecting stoploss.
Shri Ram
  • #13
  • Jan 6, 2012 2:33am Jan 6, 2012 2:33am
Quoting Uilen
Sure it's possible. But you get an increased chance of getting screwed. Trade math, miss high-impact news, and you're out. Trade fundamentals, miss a massive momentum move, and you're dead.
What if your "massive momentum" move as you put it was as a result of a final break of a technical level after the accumulation of discounted orders and not because of news at all. It amazes me how news channels are always clever after the event, it happens soooo often it is laughable.

The previous poster, Numbnuts put it very well indeed. Tech traders can use weekly and monthly charts to predict price moves way before the news has "caught up" LOL.
  • #14
  • Jan 7, 2012 7:47pm Jan 7, 2012 7:47pm
I trade technicals mostly but base longer tern trend developments on Fundamentals. Mostly this is because technicals are more mathematical and I can understand them more than Fundamentals at this point. I am making it a point to learn more about fundamentals of the pairs I trade, because to ignore them seems like missing a large part of the puzzle.

Trading mostly the 15 min chart I will not trade if a fundamental report is due on that currency pair that has a lot of influence, for at least 4 hours after the report is released. There is a lot of short-term emotional trading on strong fundamentals and for me its just to risky. Sure I miss a lot of short-term gains but I also have no big losses.

Seems to me that many fundamentals play-out over the long term in a more predictable way and influence people in a much more emotional way than technicals do.
Looking to be a better trader
  • #15
  • Jan 10, 2012 2:08am Jan 10, 2012 2:08am
fundamentals is good during the period of news release, at least > 20-50+ pips movement. Other than that , i believe the trend follow quite close to technical analysis..
  • #16
  • Edited 4:14am Jan 10, 2012 4:11am | Edited 4:14am
This question comes up pretty often on a number of fora. My own view is that most styles of trading can be made to work, as there seem to be successful traders who trade almost exclusively based on fundamental analysis, and others who trade exclusively technical.

Personally, I am a largely technical trader, as following backtesting I feel that that is the most predictable approach to the market. For my higher TF trading - Daily TF and up - I basically tune out the fundamentals and take simply technical setups. Over time, these pay out far more often than not.

For my intraday trading, I am careful not to enter a trade right ahead of a major news announcement etc., and I don't trade NFP, but my reason for being in the trade is still purely technical.

Basically, technical analysis will give me a reason to enter a trade, while I will never enter a trade for fundamental reasons. I might, however, during my intraday trading, ignore a good technical setup because of a fundamental issue.

Bottom line is, if I ditched all fundamental analysis and stuck to purely technical, I would still be profitable. If I were to ditch the TA in favour of fundamental analysis I would make heavy losses. But that is just me, I trade a technical system, so I am sure that there are others who make other things work. There are many different, successful approaches to Forex trading.

ST
  • #17
  • Jan 11, 2012 12:31am Jan 11, 2012 12:31am
I am inclined to trade using Technical, however, there are traders that trade based on news trading (can that be categorized as fundamental?), although they would used technical to determine the entry and exit eventually.

More important beyond technical and fundamental, Money management is more important, like determining your stop loss point and risk per trade. As in every trade there is a probability of winning / Losing, preserving your capital to ensure you would be able to catch the next trade is most important

I too still learning, Good Trading for us All

Cheers
Failure leads to Success if one learns from mistakes and never give up
  • #18
  • Jan 22, 2012 8:23am Jan 22, 2012 8:23am
it really depends on your trading method. There's euro debt crisis, central bank interventions, economic news release, and many more fundamentals. You can definitely use those extra information to give you an advantage if you use it right.

Charts give a good picture of price movement.. measurement of the behaviour of traders.
  • #19
  • Jan 25, 2012 4:29pm Jan 25, 2012 4:29pm
I only used technicals in the beginning and then once I started narrowing down my entries based on fundamental events it has helped.

Political rumors nowadays can shift the markets and can be quite annoying if your on the other side of the trade. Use proper leverage and never get anxious just to trade.
  • #20
  • Jan 26, 2012 2:26am Jan 26, 2012 2:26am
Both fundamentals and technicals matter, have no doubt.
As an example, i work in the grain industry as a broker for physical grain, and i see this play out all the time.

For example, fundamental picture can be very bearish, i.e huge grain stocks. But, due to over-commitment of traders for physical delivery, it often happens that there is a huge squize on the longs, as farmers realize that there is big demand for nearby delivery, and start raising prices to take advantage. This is a technical correction, in essence short term supply/demand imbalance. After these longs have covered their positions, the market will begin falling again.

Rgrds...
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