Before you step in the exciting world of forex trading currency, it is very important to know the various methods used and employed to analyze securities and follow the market.
Technical and fundamental analysis, the two common methods used to study and analyze price actions, are very popular among traders. Often it is common to see investors and traders combining the info offered by these two types of analysis to generate trading signals. The prime focus of the page is to compare and look into technical vs fundamental analysis. Read this article to compare technical and fundamental analysis.
While comparing technical and fundamental analysis it is seen that fundamental analysis makes use of a much wider range of information than technical analysis. Relying completely on financial statement analysis, fundamental analysis includes the study of the economic factors underlying the price movement of the securities. Technical analysis, on the other hand usually attempts to identify patterns in past price movements. Although both judge macro economic trends to differing degrees, they emphasize using firm specific microeconomic data. Read on to get more information on fundamental vs technical analysis.
Fundamental analysis in forex trading currency is different from technical analysis in the sense that it aims to set up a cause and effect relationship between market movements and economic developments. Technical analysis on the other hand regards the price action as the beginning and end of trading. A comparison of technical and fundamental analysis revels that while in technical analysis, there are no such things as buy, sell, and hold ratings, the fundamental analysis focuses on the value that a trader can compare with the current stock price of a given company and becomes the “buy, sell, hold” type rating.
Moving on with technical vs fundamental analysis, in forex trading currency market, the technical analysis studies charts of past market action to forecast the price movements and future market trends. Based on some important assumptions about market events, like assuming that the price movements to not to be random price trends and they tend to repeat themselves, technical analysis claims that technical tools can be used to ascertain the underlying currents behind the price action. However, the main approach for technical analysis is charting.
Followers of each discipline- technical vs fundamental analysis have always contested as to which approach works better. Rather than taking sides, it is suggested to follow an approach that brings together the two disciplines. A comparison of technical and fundamental analysis above will help you decide which route to follow in forex trading currency market.