Hi guys in a nutshell what is the difference between technicals & fundamentals?
when you focus on technicals, you’re focusing on the charts, so everything is based on the chart…trends, price action, etc…fundamentals focuses on the news events that takes place
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So is the focus on both or is one ore the other I’m assuming you monitor the fundamentals to see how they effect the technicals on your charts
it depends on the trader, but yes…I always have the forexfactory site open while I’m trading. Some people only focus strictly on technicals, and some mix both,but nobody should EVER be a fundamental trader, that makes no sense
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Any text book will tell you that Technicals drive the price charts on the lower time frames whist the underlying “overall” trend is driven by the fundamentals, a bias in the marketplace due to macro and perhaps microeconomic events.
I will add though, in many cases even before news is released it can be seen which way the market is anticipating price to go, that is when you understand how to identify key price levels.
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I have noticed that, the market has already made its move prior to most news events lol
Is that by studying the technicals obviously
yes, so focus more on technicals than on fundamentals,
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Actually, to the contrary in this case, prior to the market moving drastically because of the news you can see where price is going to be driven, intentionally, regardless of the news outcome. I’m not suggesting that I have a crystal ball, but the dynamics are sometimes very very clear.
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so basically the news really doesn’t matter then if you can tell where price will go based off of technicals lol
Well, it does matter, but in some instances the technical signs are there and very obvious prior to the news coming out. Here is an example in EUR/USD a few days back on the rally up that took out most retail stops on short positions
I’ll post a naked chart first, then apply simple level 1 Technical analysis - you can decide, it’s no black magic
Focus on the 120pip candle in the blue - this was driven by news, a big US news impact.
Now with simple TA
The clues were there, and very very evident?
A one week Fib and a three week trend line…sounds too simple, apparently not. Also look at those fib levels, respected time and time and time again. No crystal ball needed.
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Good analysis. Also another good reason why I don’t day-trade.
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It is what it is, not so long ago I moved to 4H analysis from 1H - so, many of my trades stay open for a few days, sometimes much much less, like in that example.
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What do you mean by don’t day trade pls excuse stupid question?
i’m not too sure by that either - I assume he assumes that it’s more “risky”
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Day-trading is any trading style that demands closing the position before the end of the day’s trading session. Its the hardest way to succeed in trading, though new traders often see it as low risk because you don’t hold overnight or over weekends, periods during which they cannot react to changing prices.
If they are relying on a changing chart set-up to drive their open trade management decisions (exit, enlarge or reduce), then they are right in theory. But in practice this does not work, as the TA permutations are too complex, fast and - even worse - transient, for this to work. 90% of traders who started trading in the last 3 months will be broke within the next 3. I bet that 90% of them only think of trading as day-trading. If you do what the 90% does in the same way they do it, you will probably get the same result.
Longer-term trading is much lower risk and uses much more reliable TA set-ups. There is more time to do TA and plan a strategy, more time and data is available to review and improve the strategy, element by element. Many day-traders don’t have a strategy as such, they simply decide they will be buying whatever because its price is higher than it was yesterday and has been rising for an hour today: or they will sell - for exactly the same reason - price is higher than yesterday and is higher than an hour ago. That’s not a strategy.
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Worth pointing out that last time I checked the charts, 16 of the worst 1-day falls in the Dow since 1900 came out of downtrends, only 4 came out of a clear blue sky.
Also, the worst(?) single day price shock in forex, the EUR/CHF collapse of 15/01/15, a drop of 17.2%, came out of a downtrend that had been established for months and months.
One day I will check the biggest single day shocks in forex but I’m going to suggest the old proverb is correct in forex too, that bad news comes out of downtrends and good news comes out of uptrends…
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Just did a quick scan of the 20 biggest single day falls and rises in EUR/USD since 1976. Aim was to confirm if the 50EMA slope and the price location relative to the 50EMA on the prior day predicted the direction of the move.
Very disappointed. Found that only 5 out of most exceptional 20 rises were predicted by positive trend. Of the 20 most exceptional falls, 10 out of 20 were predicted by negative trend.
So the old rule that bad news comes from downtrends not holding in this pair.
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Thank you do you trade using orders and stop losses etc?
Yes. I only ever enter trades via pre-set orders - I can set these ahead of support or resistance in the form e.g of daily highs or lows. I always set a stop-loss, though these are usually so wide that they are rarely hit, I usually close losing trades because their TA has deteriorated well before the stop is hit, so the losers are small. The other side of that coin is that I always pyramid the winners.
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