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.
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.
