The Technical vs. The Fundamental

The Technical vs. The Fundamental

Technical and Fundamental Analysis are both tools used by traders to help determine a trading strategy. Both fundamental and technical analysis help traders to predict possible trends and future prices.

Technical Analysis; “The process of analyzing a financial instrument's historical prices and other statistics generated by market activity, in an effort to determine probable future prices” ( here link to the technical page)

Fundamental Analysis; “'The determination of price based on future earnings – it focuses predominantly on factors such as the overall state of the economy, interest rates, production, earnings, and management” ( here link to the fundamental page)

Here it is put simply;

Technical analysis looks at past prices of an asset to predict future prices, and Fundamental Analysis believes that market movement is determined by macro and microeconomic factors including interest rates, war, political unrest, recession, global economic depression etc.

Essentially the fundamentalist studies the cause of market movement, while the technician studies the effect

There are probably a million questions running through your mind;

  • “Which one is better?”
  • “What’s the difference between the two?”
  • “Can I use them both?”
  • “How do I analyze?”
  • “What do I analyze?”

It depends on your trading style, your objectives, your time frame and many other factors. Don’t put yourself in a box and stick to one style, there’s value in diversity.

You can use any or all of these different methods as each complements the other. Many investors use technical analysis and graphing to decide on strategic exit and entry points, but use fundamental analysis to decide which asset to trade on. There are limitless combinations, and limitless opportunity