Technical analysis vs fundamental analysis, which is better?
From looking at price movements in the past to predict future price movements to looking at the macroeconomic factors, which is the type of analysis for you to choose if you want to learn Forex? To know which to choose, let's look at the differences between these two types of Forex analysis.
Which One Is More Preferred?
You can find traders debating about this matter. Events that affect your trading is of course as important. When something happens to the global market, the market moves quicker. But, technical analysis has proved its way to create successful traders as well. Both has a specific purpose and has their own unique ways to help us reach our goals.
• Fundamental Analysis
If you pick fundamental analysis, then you will spend most of your time looking at data and global news. This means you are focusing more on the reports of the economics, political, announcements, events, environmental, and other data that affects trading. In other words, you need to catch up on what is going on in the global world.
From those data, you can analyze the factors and forecast the price movements in the future. How? By understanding how these events affect how countries' economies are doing. Know that these are related to each other and will affect your decisions when it comes to trading in
Forex market.
Of course, there is no way to surely knows how it will go but this is your way to forecast what will happen in the future by using the fundamental data. This takes time to understand and you have to learn deep into the data. Long-term trader prefers this analysis strategy more rather than technical analysis.
• Technical Analysis
This type of analysis is best for short-term traders. If you choose to analyze the market with technical analysis, then you will spend most of your time looking at graphics. You are identifying the statistical trends from the trading activity. Traders with this strategy assume that the movement of price is not random and can be seen and forecasted by looking at the pattern.
Through technical analysis, we can see where the potential market is going before they happen. After that, we can make our decision to reach the winning side of market. This is important for short-term traders that only trade for minutes and hours.
This might seem complicated at first, but once you learn the tools and skills that it takes to learn Forex technical analysis, you will be a better trader in the future. With the help of mentors from broker companies like Didimax, you can easily understand about this.
Is It Possible To Use Both?
By picking one type of analysis, you might miss out on the advantages of other analysis. When you are using fundamental analysis, you might miss out short-term opportunities that you could find with technical analysis. The same goes with technical traders that probably will miss when some important event occurs. A perfect blend of both can higher your potential profit.
If you only focus on one type of analysis, you will not maximize your insights and your decision might not be the most accurate and effective. Trading is not about choosing to analyze only one aspect. Being aware of both will do best as you are aware of the macroeconomics of the world and are up to date with the events that are happening.
At the same time, you are also seeking the opportunity to seek patterns in technical analysis. Instead of dropping one type completely, you are relying solely on one type of analysis. When learning Forex, you may choose one to focus more than the other choice, but ignoring the other will only create a loss for you.