Fundamental Analysis vs Technical Analysis

In this video, the speaker talks about the difference between fundamental and technical analysis and how psychology is an important element that should go alongside with both.

Beginner traders make the assumption that some traders are successful because one group employs fundamental analysis while the other uses technical analysis. So which method is better at predicting price movements? The answer is both, and one is irrelevant without the other.

The technical analysis side shows chart highs and lows, and the fundamental analysis side helps traders understand what caused the movements (i.e. socio-political influences). The speaker goes on into the details of each method.

The key focus of fundamental analysis is political and economic events. These events are used to predict how foreign exchange rates will move based on past market movements. Fundamental analysis traders watch political news to anticipate how the dollar will behave and act accordingly. For example, a report of rising unemployment rates will cause a drop in dollar value.

The importance of timing is stressed, which means the press release and news details are meaningless without knowing the EXACT time that they will happen. Knowing the time allows these traders to 'snipe' the price movements and place trade orders on the dot.

On the other hand, traders who use technical analysis are experts on historical data. These traders easily spot chart patterns so that they can make sound trading decisions. The speaker went on to underline how indicators of sentiment are used to predict trader psychology.

Fundamental Analysis vs Technical Analysis Quotes:

  • The argument as to whether fundamental traders are more successful or technical traders is really not an argument. The professional trader uses both. One without the other is irrelevant.
  • There are many traders who are largely successful because of their ability to look at the charts and understand what the data on the screen is trying to tell them. Remember that the data on your charts is always trying to tell you something.
  • All we need to do as traders is to implement our mental filters and to understand these three categories as a whole and as they relate to one another.
  • The psychology of trading teaches us simple principles such as keeping emotion completely out our trading. We never want to enter the market because we have a gut feeling...that is gambling.
Submitted by YouTube Trader on Thu, 07/21/2011 - 23:27

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