Can someone explain me in detail what’s the difference between fundamental analysis and technical analaysis in forex trading
Technical analysis is the study and use of price charts in order to determine the more probable future price movements - it can potentially assist in identifying the direction, strength, starting point and duration of price movements.
I don’t do the other one.
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TA and FA in the market are not different - whether FX or Bonds or Stocks or any instrument.
Guys will say that TA focus is in the past up to the now as described on a chart and FA focus is on the now leading to the future - yet is not that the same thing as TA?
Here is the reality of today’s market - it is driven by algo’s (various from bots to HFT’s but same thing - human traders reacting to price dictated by circumstance.
Always use current circumstance in thinking - GBP is on the rise because Uk wages growth is on the rise - wages stoke inflation and inflation is fought by the CB with rising int rates and higher rates mean a better return on GBP investments which means more demand for GBP
Then again demand for USD is diminishing cos lower inflation reported this week means likely less increase in rates USD thus lesser demand for USD investments.
So what about TA? well cable (Gbp/Usd) broke it’s previous high 3 days back -same time as the UK wages info - Eur/Usd (fiber) waited a little until the US CPI news - TA guys watch both as ‘correlated’.
All this FA ‘news’ is good for risk - especially the US cpi this week - so as the TA guys say it’s all priced in in the chart - are they right?
Risk is reflected best on stocks - this is the go to place for money to seek return - so what has TA been saying in the past?
The SPX broke it’s high beginning June - TA has been buying risk ever since.
This week US inflation less than expected - good for inflation thus lwr rates thus better for business thus good for risk - 92% expectation result on that FA number.
Lwr rates means less return on USD - so more buying Gbp/Usd and Eur/Usd
There is no difference in TA and FA
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Technical analysis is the particular behavioral pattern of an investment product (stocks, bonds, forex pairs, nfts etc) based on its already established price movements over a given past time period as represented by an interval time chart in order to predict its future price movements using already developed mathematical indicators. Fundamental analysis is the prediction of a price movement based on current worldly economic conditions, financial news releases and statements made by regulatory agency heads and big business & political leaders greatly influencing the future price movement of an investment product.
They use different information to reach a conclusion. Technical analysis use only price information，while fundamental analysis use economic information to determine the impact on forex.
In my opinion, the easiest way to understand the difference between these two types of analysis is by using a chart.
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If in your analysis you use only the chart and the tools that are available on the platform to build figures and levels, then this is technical analysis. By the way, indicators also belong to technical analysis.
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If you use knowledge about economic factors, news events or speeches of financial organizations to understand the direction of price movement, this is fundamental analysis.
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Fundamental analysis actually means to check the news, the figures behind an asset and the road map of that asset to determine its future success or failure. Technical analysis means analyzing a chart, no matter what chart, but based on what the chart already has recorded, you predict the next moves.
While both methods are used to predict future price movements , they use different sets of datas and analytical tools. fundamental analysis mostly includes studying economics and financial and also geopolitical factors that may affect the currencies and while technical analysis includes historical price data and using various technical indicators and chart patterns to identify potential trading opportunities. It’s important to note that both fundamental analysis and technical analysis have their strengths and weaknesses, and traders may choose to use either or both approaches depending on their trading style, time horizon, and personal preferences.
Fundamental analysis focuses on the big picture stuff. It involves examining economic factors, news events, and market data to understand the underlying value of a currency.
Technical analysis, on the other hand, is all about reading charts and patterns.
Thank you for providing a valuable and informative information.
You cleared my doubt and explained in a simple format so thanks for sharing your perspective. i got it
Thank u for sharing valuable information now i am clear about technical and fundamental analytics