Technical forces and fundamental forces are the two main drivers of the forex markets. They both give you valuable information but is one better than the other?
Fundamental forces include things such as interest rates, balance of trade data, economic and financial reports, money supply etc. Technical forces on the other hand are simply a reflection of the fundamental analysis at the current market price.
Traditionally, fundamental analysis has been the default recommended method of trading. However this type of analysis takes a tremendous amount of time to do properly. Unless you have a few hours a day to devote to watching the markets, and know precisely what you are looking for, then it can be very difficult to do profitably.
The main problem with fundamental analysis is that because you need precise timing to move with the markets, you must always be “on”. Successful fundamental traders have usually made trading an integral part of their lives and they are never far from their trading platform — when a news story hits they are ready to trade.
Everyone else who doesn’t have the time to spend watching the markets is too far behind the action and ends up getting taken for a ride. To be successful you must be ready to react in an instant.
The key to understanding how fundamental analysis works is realizing that the underlying market data is NOT important. All you need to be concerned with is the market’s reaction to that data.
It’s important to note that most fundamental data is projected, meaning that the projections change based on the release of news or reports, rather than being created by them. What this means to fundamental traders is the timing of analysis is the most important thing and you profit due to the swing in market reaction.
Technical analysis, on the other hand, requires a lot less time and effort. It also allows you greater flexibility and mobility in the markets. Technical analysis, being based on fundamental analysis at the current market price, gives you a shortcut as all the fundamental work has been done for you by the market. You simply establish your trading conditions and ride the trend.
The key to technical analysis is trend spotting — to be successful you need to identify, confirm and enter a trend while giving yourself enough time in the trend to realize your profit targets. At the other end of the trade, your technical analysis must also identify, confirm and tell you when to exit a trend when the trend is coming to an end.
That’s why I much prefer trading based on technical analysis — you still get all the benefits of fundamental analysis (with all the hard work done by the market) but you can trade in just a few minutes each day and make more profit with less work.
If you want the best chances of success in forex, you should look for a Forex Training Course that uses technical analysis, such as the Forex Profit Accelerator.
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