What Happens if Technical and Fundamental Analysis are Ignored ?

What May Happen if Technical and Fundamental Analysis are Ignored ?

Trading approaches are usually roughly divided into technical or fundamental approaches. Fundamental analysis can consist of more elaborate analysis based on economic data, such as the construction of models or it can be more basic, such as reading an economic calendar. In the Forex market is may be found that fundamental data does not help that much in providing a direction, as the market has a tendency to oscillate.

Technical analysis can be more elaborate, such as using a set of technical indicators, providing constraints on multiple degrees of freedom, forcing a description of the potential future move of a pair into a predicted outcome or set of outcomes. However these can be found to be inaccurate as well.

So what happens if all of these approaches are ignored, simply because they seem not to work ? So the trading information is gathered from the movement of prices in the chart, looking for patterns of support and resistance. As the economic calendar is being ignored, then it is possible that a pair will suddenly start moving sharply. But the idea is that this becomes part and parcel of the landscape of value changes. Thus instead of trying to predict, one is trying to go with the market.

One of the problems with this is the same problem all directional analysis has: the market does not tend to favour a direction, but one looks carefully for signs that it is favouring a direction. Thus one can look for trend ends and beginnings. One can take note of the value of a pair, to indicate whether support and resistance may be potentially a factor.

While it can be argued that these approaches are a kind technical analysis (i.e. support and resistance and value patterns) the idea is not to predict. But the underlying problem is that is can be helpful to impose a predictive template on the market, using more formal analysis, to provide a basis for making and exiting a trade. That is technical and to a lesser extent fundamental analysis structures a trade, in an unstructured complex market.

What happens though is it may give a deeper understanding and feeling for the way the Forex market moves, which can both undermine the argument for the use of other analysis, but may also provide a basis for choosing and applying it in a more native fashion.

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