Beginners Guide to Fundamental and Technical Analysis

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When newbie CFD traders want to learn the analysis or become an analyst, he gets confused about which one he should choose. There are two kinds of Forex market analyses – i) Fundamental analysis and ii) Technical analysis. Both of them are different from each other. As a newbie, you should pick up any one of them at the beginning, but later on, you can use their combination to be an elite FX analyst.

What is a fundamental analysis?

Fundamental analysis is a process of assessing several financial and economic factors. A fundamental analyst focuses on the factors that are responsible for controlling the currency’s price movement. This analysis is a kind of study and evaluating the news. The analyst will use the public or country’s data to predict the upcoming market condition.

An investor can do this fundamental analysis by evaluating different data like interest rate, inflation, unemployment rate, GDP, stock market, etc. Fundamental analysis includes these things. In a nutshell, a businessman has to analyze the economic and financial factors to be a fundamental analyst.

What is technical analysis?

Technical analysis teaches discipline in the traders because this analysis helps them to learn the new opportunities, possible movement of the trend (bullish or bearish movement). This is not like a fundamental analysis. You have to realize the breakthrough, resistance and support level, stop-loss order, risk, and money management, when to sell at resistance level or when to buy at support level. View page at Saxo and read articles on support and resistance. Soon, you will be getting a clear idea how the elite Singaporean traders are taking trades’ at the most important levels.

An investor has to concentrate on the volumes and prices, and he should use different analyzing tools to predict possible short-term trade. Many professionals opine that technical analysis is more helpful than the fundamental analysis.

Tools for fundamental or technical analysis

The primary difference between these analyses is the determination of a currency’s price and value. Fundamental analysis is related to the basic difference between the stock’s value and a specific price at which the stock is being traded. The technical analysis is related to the price action, which provides sufficient clues to the supply of the stock and the dynamics of its demand.

Fundamental analysts always concentrate on the country’s financial performance and its position, its competitors as well as the economy. Analysts collect the data and estimate the ratios and metrics, which reflects the financial performance of the country.

Technical analysis is not so easy as people think. A technical analyst must use the price charts to predict the next movement. Most of the time, they use candlestick charts or line charts. Based on their chart types, the tools differ. There are some indicators that the analysts use, like moving averages or oscillators.

Fundamental analyst or technical analyst – which one is better?

Many people ask this question to the professionals. What should they do? Should they choose to be a fundamental analyst or a technical analyst?

According to the opinions given by the experts, the fundamental analysis can be useful if you want to enter a long-term trade, but technical analysis can be helpful for a short-term trade, especially day trading. An investor can learn both of the analyses and combine them to enter in a medium or a long-term deal.

If an investor wants to enter a short-term trade, he must think about the demand and supply to predict the movement within a short period. However, remember that market sentiment can ruin the entire analysis and research. Both of these analyses have pros and cons.

Conclusion

Finally, it can be said that a Forex trader can invest his money either in fundamental analysis or in technical analysis. He can learn both and can combine them to make his analyzing skills even more powerful.