Forex Trading Education - Fundamentals or Technicals?

by : Harold Hsu

What Is Fundamental Analysis?

Fundamental analysis in Forex trading refers to the study of the underlying elements that influence the economy of a particular country. It is a study that attempts to predict price action and market trends by analyzing economic indicators, government policies and societal factors (just to name a few).

What Is Technical Analysis?

Technical analysis refers to the forecasting of future price movements by looking only at market-generated data such as historical prices. Almost every retail trader will use some form of technical analysis when trading.

Technical analysis can be as straight-forward as simply using a moving average indicator to signal a buy or sell opportunity. However, most traders prefer to use more sophisticated technical tools to help them identify good market entry and exit points.

Fundamental Trader or Technical Trader?

There is a tendency for people to classify traders into these two distinct schools of market analysis. People often ask traders "Are you a fundamentalist or technician?" as though both options are mutually exclusive.

In reality however, it's becoming more and more difficult to be a pure follower of either schools of thought. Successful traders often have to rely on both fundamental and technical information to make good trading decisions. Fundamentalists will still need to pay attention to the short-term price action on the trading charts, and technicians cannot afford to ignore the role of critical economic announcements and data.

It is the appropriate use of both sources of information that guides a good trader to enter into high probability trades.