Do the Fundamentals matter that much?

I was wondering guys, since technical analysis is the nearest objective way of trading than fundamental analysis, which we all know is much more subjective, can’t a forex trader base his trading decision solely on the technical side using price action and just avoiding major news events?

Trading short-term, Yes.

Trading long-term, Yes, but most major news events can be ignored until they affect price.

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So you also think that technical analysis has much more weight than fundamental analysis?

No, that’s not what I’m saying.

Going back to your original question, you asked if forex could be traded using TA - AND - avoiding major news events. If you’re short-term trading you had better give a great deal of weight to news events. Getting out of a position and into cash before a known news event would be a prudent policy in many cases.

Trading long-term, you’ve generally got time to see the market’s reaction to news and also distance from price to stop so you can refine how you manage the situation.

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I usually see that news of course spread some noise on price action, but usually the overall technical environment still holds… I’m far from being an experienced trader but this is what I notice :slight_smile:

When price is in an uptrend most new news has a positive or neutral effect. When its in a downtrend, it mostly has a negative or neutral effect.

But its the same with TA. In an uptrend, resistance levels mostly fail or fail to cause a reversal. In a downtrend, support levels mostly fail or fail to cause a reversal.

On a long-term basis, the frequency of unexpected trend reversals is over-stated, though that’s not to take away their potential impact if and when they do occur.

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News events positively have an effect though it is usually short-lived. Actual market trends have a more long term effect.

LOL! You couldn’t make up some of this stuff. :grinning:

“Actual” market trends as opposed to what: “virtual” market trends, perhaps?!

Market trends are the outcome. They ARE the effect.

The question you might want to ask yourself is “the effect of what”?

And from there, you might get as far as wondering whether perhaps fundamentals cause them?!

:grimacing:

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A good fundamental analysis can bring a lot of profit. But experience has proven that just a few traders are able to make a truly qualitative fundamental assessment of the market.

I think it depends on how long you intend to hold your position. Fundamental analysis is better suited to longer term trades, the ideal in that case would be to find your longer term view using fundamental analysis and then time your entry using technical.

I wouldn’t say that fundamental analysis is more subjective than technical, in fact the important cause and effect relationships in the fundamental factors that determine demand for one currency versus another over time is probably easier to quantify.

Hi @Mr.PipSeeker,

What makes you think technical analysis is less subjective? Two traders can look at the same chart, and the first might look to buy, when the second looks to sell, even if both use technical analysis to base their decisions.

Sometimes even an individual trader can have trouble making up his mind on whether he wants to buy or sell: Both buy and sell positions losing?

Without a doubt fundamental analysis is very important, some traders give preferences to this method of market forecasting, without resorting to technical analysis.