Forex Technical vs Fundamental Analysis

Forex Technical vs Fundamental Analysis

Forex Technical vs Fundamental Analysis

Is there some sense in which fundamental analysis is less optimal than technical analysis in Forex trading. The question can be rephrased to ask if technical analysis more directly addresses direction inn the movement of a Forex pair. It is the case that fundamental analysis may not seem to be able to project outcomes. It may seem that technical analysis can project outcomes. Does this mean that technical analysis is more tightly aligned with the market in some way.

It may rather be the case that technical analysis is designed to project outcomes, while fundamental analysis is not, except in very special cases. The special cases notably include news trading, which is driven by fundamental analysis, but where analytical variables are reduced to some extent to a direction up or down based on factors such as the deviation of the actual result from the expected result. However even here the time factor can and does result in complex moves happening quickly.

In general a change in fundamental data may affect a Forex pair but this can happen in complex ways, expressed over time, for example a change in direction, but expressed in retracements and opposite moves to the overall direction, making them hard to trade. Technical analysis tends to produce clear signals, that is a projection of an outcome. However technical analysis can frequently give wrong signals.

When using technical analysis with fundamental analysis, it may be possible to use fundamental data to give a rationale in a broad sense for market action. This is also possible with technical analysis, especially if grounded in the chart, for example value levels. What the connection between chart structure and fundamental data might be, is an interesting question. It can be noted in news trading that even the strongest directional moves will respect technical levels, for example stalling at past resistance or support. Thus at least technical data can provide a structuring for a fundamental interpretation of a chart.

Fundamental data can perhaps be seen as part of the process which shapes moves on a chart, as they can offer entry and exit points for trades, but what the market does with these inputs, is not necessarily contingent on the data and reflects perhaps more technical forces at play, which is why fundamental based trades can be hard to make such that they produce outcomes, except to provide exit and entry points. This is why managing a trade requires some technical input, though again the issues with technical accuracy makes managing a trade exactly what it is, hard.

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