What is the Difference Between Technical and Fundamental Analysis?

Whether you’re looking to trade day-by-day on the forex markets, or you want to put some money into some assets for the future, you’ll want to know about technical and fundamental analysis. They are, quite simply, the two schools of thought when it comes to speculating on whether the price of an asset is going to move up or down. Many traders will use one or the other when working out when to enter and exit the market, but many will also use a combination of both, and it’s all down to personal preference and what works. Let’s take a look at the two here.

Fundamental Analysis

Fundamental analysis has a pretty broad definition, but generally it looks at all of the underlying things that move and shape the markets. This includes delving into the financial details of companies that are involved in the industry, taking note of events and announcements, and also using the history as a guide for how the future might play out. Fundamental analysis is often seen as more difficult to use because it requires a lot of knowledge, and in some cases there’s simply no substitute for experience.

Technical Analysis

Technical analysis is mainly about looking at price charts, and generally concentrating on what the numbers are telling you. It’s all about studying supply and demand in a market and working out what that means for the future, whether that’s in five minutes, a day or a decade. Some of the people who believe fully in technical analysis as the method for speculating also believe that many aspects of fundamental analysis are pointless, because all of the information you might glean from it is already influencing the markets, and is therefore present in the price movements.

It’s impossible to say whether one method is better than another, and which you choose will come down entirely to whichever you feel most comfortable and have the most success with. Learning all you can through online sites is the very best way of working out what’s best for you, but if you do want to get involved, it’s critical that you understand both schools of analysis first. It’s much better to spend some time on something you eventually decide isn’t for you than it is to ignore something that might actually be a better money-making strategy for your skills.