FOREX
APPROACH
Fundamental
vs Technical Analysis
Fundamental
Analysis is a method of forecasting the future price movements of a
financial instrument based on economic, political, environmental and
other relevant factors and statistics that will affect the basic supply
and demand of whatever underlies the financial instrument.
Technical
analysis is a method of predicting price movements and future market
trends by studying charts of past market action which take into account
price of instruments, volume of trading and, where applicable, open
interest in the instruments.
In
practice, many market players use technical analysis in conjunction
with fundamental analysis to determine their trading strategy. One major
advantage of technical analysis is that experienced analysts can follow
many markets and market instruments, whereas the fundamental analyst
needs to know a particular market intimately.
Main
differences between the two types of analysis
Fundamental
analysis |
Technical
analysis |
| Focuses
on what ought to happen in a market |
Focuses
on what actually happens in a market |
| Factors
involved in price analysis: |
Charts
are based on market action involving:
|
1.
Supply and demand
2. Seasonal cycles
3. Weather
4. Government policy
|
1. Price
2. Volume
3. Open interest |
The
fundamentalist studies the cause of market movement, while the technician
studies the effect.
Analysis
of Foreign Exchange Markets
Foreign exchange traders base their decisions on technical analysis and
fundamental analysis. Technical traders use charts, trend lines, support
and resistance levels, mathematical models and other means to identify
opportunities and drive trading decisions. Fundamental traders identify
trading opportunities by analyzing economic information.
