ADVANCE FOREX EDUCATION: FUNDAMENTAL ANALYSIS VERSUS TECHNICAL ANALYSIS

ADVANCE FOREX EDUCATION (PART ONE)

FUNDAMENTAL ANALYSIS VERSUS TECHNICAL ANALYSIS

WHAT IS FUNDAMENTAL ANALYSIS?

Fundamental analysis is the study of the core underlying elements or indicators that influence the health of the economy of a particular country. It is the method of study that predicts price actions and market directions by analyzing economic indicators, government policies, societal and political factors, natural disasters, outbreak of wars, epidemics, earth quakes, etc. within a business environment.

Think of the financial market as a big clock, the fundamentals are the gears and the springs that move the hands around the face. There are the engines that move the automobiles. You can look at the clock and tell what time it is now, and the fundamentalist can tell you how it came to be this time and more importantly, what time or more precisely, in FOREX TRADING, what price it will be in the nearest future or at least whether the price will go up or come down, but the technician will not be able to do so.And yet the talk about professional analysis becomes more meaningless.

 

THERE ARE TWO BASIC CLASSES OF FOREX TRADERS.

Fundamental analysts and Technical analysts. It is either you are a “fundamentalist” or you are a “technician”. Some people find it quite convenient to be neither here nor there. Some technical analysts find it very difficult to stick to their analysis due to the “fear” of pending economic news data or critical political decisions or even the myriad of societal issues that influence prices. The fundamentalists can successfully remain focused on these events without being distracted by the various technical indicators that are not empirically proven to be effective in forex trading. And those who are on the side lines will tell you that they still find some "GOOD" things about support and resistant levels. They are not professional traders.

They are just trying to create that impression before new traders who are inexperienced. 

In news trading, there is no way any support or resistance levels can help you in determining when to take profit and when to close a losing trade.

In my seven years of forex business, I have tried unsuccessfully to get a single technical analyst to correctly predict price action based on any formula, all to no avail.

They only come to terms with fundamentals, when their LONG OR SHORT

POSITIONS have been "disorganized" by some news releases. I always ask for their so called resistance and support levels when price action hits their Stop Loss. Fundamentalists are said to be purists to a large extent, because it is quite easier to remain a fundamentalist, once you are one, than to remain a technician for a long time. Due to the fact that over 95% of technical analysts fail, they readily embrace the principle of " fundamentalism", in forex trading. We fundamentalists, are quite successful in forex trading because, we rely on the factors that actually drive the markets. Incidentally, most forex brokers who run Dealing-Desks, do not like fundamentalists or news traders. We are feared and dreaded, not because we trade forex, but because of the pinpoint accuracy at which some price action can be predicted by us. That is the reason why there are numerous cases of forex brokers, closing the forex accounts of traders who trade the news. The Technician is what the Fundamentalist is not.You cannot "marry" the two together.One thing that readily comes to mind is that, once you are able to delve further and further to acquire knowledge, you will discover that your knowledge and understanding of the global financial market will increase immeasurably.
Fundamental analysis is a very effective way to forecast economic conditions, but not necessary exact market price but price action.
A trader who studies the markets very well, using fundamental analysis, is in a better position to correctly predict price action, not the trader who rely on objects and features that have nothing to contribute to price action.
Forecasting models are as numerous and varied as the traders and market buffs that create them. Two people can look at the same data and come up with two different conclusions about how the market will be influenced by it. Therefore, it is quite important that before casting yourself into a particular mold regarding any aspect of market analysis, you most study the "fundamentals" and see how they best fit your trading style and expectations. Don’t succumb to ‘’ PARALYSIS BY ANALYSIS’’.  Sometimes, traders fall into this trap and are unable to pull the trigger on a trade. This is one of the reasons why a few traders turn to technical analysis that prove no guarantee of any sort. A lazy trader's fortress.
Trading in particular, without knowing the intricacies of forex trading, is not the best approach. For forex traders, the fundamentals are everything that makes a country tick. From interest rate and central bank policies to natural disasters, the fundamentals are the "main thing". I am still searching for the 

first forex broker that will teach forex traders how to trade the US NON FARM PAYROLLS and other high caliber news data. Watch out for part two.Some people are already annoyed of me and my write ups. Who cares?http://comprehensivenewstrading.blogspot.com/