Is fundamental analysis less important than technical analysis in forex?

[trader_980]

You can combine both types of analysis to achieve your goals. When you use both fundamental and technical analysis, you can get more accurate picture of the market.

I agree with you opinion. Technical analysis is all about looking into the price movements in the economy through charts and other tools, whereas, fundamental analysis deals with knowing about the economy as a whole. Where technical analysis is relevant for short to medium term decisions, fundamental analysis is required for medium to long term trade decisions.

You have to be good at chart analysis for undertaking technical analysis in an effective way. For fundamental analysis, however, one needs to be up-to-date with the news, economic variables like inflation, GDP rate, etc. All in all, for procuring maximum returns out of forex, both technical and fundamental analysis hold a unique position.

 

[pipeguy]

Why? Lack of timely and complete data or it is hard to master?

I don't think its simple and I'm not even sure FA is worth any private retail forex trader's time.

 

[tomorton]

Why? Lack of timely and complete data or it is hard to master?

No, its just that the effect of FA events / news etc. show up in price as TA, in which case your stops / orders / manual trade management take care of it.

 

[J_C_Anderson]

To my mind, both of them are important equally. As it was mentioned above, fundamental analysis gives trader a general understanding of the whole picture while technical analysis is necessary to find the entry point with the optimal risk-reward ratio even for mid-term or long-term trades. Thus, it would be wrong to ignore one of this approaches.
At the same time, fundamental analysis could be quite difficult for retail traders having no relevant education since it requires in-depth knowledge of finanical markets and underlying mechanisms to be able to understand the nature of price movements and make assumptions on probable reaction on particular news or events. That is why it would be easier for the traders, especially for newbies, to base their actions on current reaction of other market participants - something like well-known trend trading concept. In such case trader will need only to join the price movement with the best possible risk-reward ration. Of course, he will also need to have general understanding of what is going on to be able to evaluate the probability of trend continuation and profit potential. In other word, it is important to understand the importance of news.

 

[pipeguy]

No, its just that the effect of FA events / news etc. show up in price as TA, in which case your stops / orders / manual trade management take care of it.

You want to say that event risks like Brexit or Fed crashes in Dollar or Gold can be predicted by technical analysis? I guess TA can explain FA events to some extent, but there are no drawing tools or patterns in EA that can explain sharp price moves. But probably I'm missing something.

 

[themickey]

..... But probably I'm missing something.

 

[tomorton]

You want to say that event risks like Brexit or Fed crashes in Dollar or Gold can be predicted by technical analysis? I guess TA can explain FA events to some extent, but there are no drawing tools or patterns in EA that can explain sharp price moves. But probably I'm missing something.

I don't think TA should be used to predict what prices will do, its a business planning tool so it is really for predicting what the trader will do. Nor should TA be burdened with having to identify the causes for why price did this or that: charts don't make prices move, they just display the movement.

But just because you can't (or shouldn't) use a screwdriver to hammer in a nail doesn't make it a useless tool.

Knowing that it was the Brexit result that caused the GBP price moves that followed did not affect how I traded them. Not knowing would have had no impact either.

 

[expiated]

Since fundamental analysis is near-impossible, should focus be placed mostly on technical analysis for forex?

Supposedly Jarratt Davis was a complete failure trading Forex until he switched from technical to fundamental analysis, after which he is said to have become the second best performing Forex trader in the world (from the period between 2008 to 2013).

Personally, I don’t think there is one pat answer. It probably depends to a significant degree on your skill level, the extent of your knowledge, your personality, your trade style, how much time you can devote to trading, how you mange money, and who knows how many other factors.

I’m an intraday trader (when I have the time) so fundamentals no longer play much of a role (if any at all) in my decision-making process. I’m going to go in whatever direction price is going, so this will automatically coincide with a correct read on the fundamentals—but without any guesswork or speculation involved whatsoever. I trade what’s in front of me as it unfolds in real time.

 

[themickey]

Following your TA indicator

 

[Esha.J]

Always follow your rules for your goal because to achieve something you have to follow the plan. Every concept in the Forex market is important and having its own value.