Technical and Fundamental Analysis

Fundamental and technical analysis are important tools in the Foreign Exchange market. Understanding the difference and how they are used is vital for success in trading.

Technical analysis looks at the price movement and uses the information to predict future price fluctuations. On the other hand, fundamental analysis uses economic factors also known as fundamentals.

Financial Statements vs Charts

A technical analysis uses charts to analyse data, while fundamental analysis starts with the financial statements.

Fundamental analysis looks monetary policy of central banks, political influences and other conditions that could influence the value of specific assets.

Combining Fundamental and Technical analysis

Very often successful traders use both fundamental and technical analysis to achieve greater success. For instance, some fundamental analysts use technical analysis techniques to determine the best time to enter a position.

Technical analysts use fundamentals to reassure their decision. For example, if a sell signal is given through technical indicators, a trader might look at some key fundamentals to assure their decision.

Next: Technical Analysis: Charts