Forex Trading: Choosing Between Fundamental and Technical Analysis

While there is no dearth of information for forex traders to choose, the information must to selected and evaluated for initiating profitable trades. The Forex markets are driven by two major forces: fundamental and technical forces.

As is normal with all debates, there is an equal number on either side, some traders swear by technical analysis being the best while other would have it that by analyzing fundamentals one can read the market better.

Fundamental Analysis

Traders using fundamental analysis for potential trades have to time the market to be able to move along with the market. This is possible only if the trader has chosen day trading to be his preferred plan. As a day trader you are ‘always on’ and have to be on your trading platform always.

The markets are constantly reacting and discounting to information from around the world. The reaction times can be as short as instant. You miss the action triggered by the ‘surprise’ report if you cannot be at your trading platform in a minute.

This translates into a situation where the market’s reaction to data is important while the data per se has no relevance. What is important here is that most fundamental data is in the shape of projections. The news is confirmed only when there is an official release to authenticate the ’projected’ data. This makes timing even more important. If you can time the markets then only you stand to make short term instant profits. If you initiate trades based on fundamental analysis but have not chosen the right time then you should be ready to suffer a loss.

Technical Analysis

Traders using technical analysis are in an advantageous position as they have maneuverability in the markets. The fundamentals are reflected in the technical analysis. The trends that you see in technical analysis are based on certain criteria. When you ride a trend you are reasonably sure that it is appearing on the chart due to the changed fundamentals.

When you are trading on technical analysis you have time in your hands. The trend itself allows you that time to generate fast and instant profits. At the same time, technical analysis by its inherent nature indicates when the trend is expected to run its course. The price movements in forex markets dictate what trades you should make. Either way, you will find that your profits run in forex markets.

The bottom-line is that technical analysis is easier and allows you enough time to initiate trades. You need not be at the terminal all the time. You can increase your profits by looking into the end-of-the day trading concept recommended by Bill Poulos in his Forex profit accelerator course.