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.
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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.
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