Fundamental vs. Technical Analysis for Online Traders

Fundamental vs. Technical Analysis

In the Forex markets, deciding whether fundamental or technical analysis is the better approach is still a subject of debate. Ultimately, it comes down to your preferred trading strategy, which will largely be based on your analytical approach.

That said, most Forex strategies should seek to successfully combine aspects of both fundamental and technical analysis.

In this article, we take a closer look at the differences between the fundamental and technical analysis for online traders.

Understanding fundamental analysis

When it comes to valuing everything from corporate shares to real estate, fundamental research is a need in the financial world. Currency traders use it extensively to investigate the underlying causes of seemingly random variations in exchange rates.

A currency’s value is determined by its political, economic, and social elements, which are analysed using fundamental analysis. To make well-informed trading decisions in forex, it is necessary to understand what drives a currency’s fundamental worth.

Understanding economic factors that can influence currency supply and demand is all part of fundamental research in the Forex market.

To put it another way, the trader assumes that the value of a currency will grow if demand rises or supply falls. The price of a currency should decline if there is a decrease in demand or an increase in supply.

Fundamental analysis strategies

  1. News trading

    Using basic Forex trading strategies such as trading the news is one of the most common practices nowadays.

    Trades are opened based on the release of economic data, either before or after, depending on whether the trader has a predetermined bias.

    Statistics that are most significant to Central Banks (currency custodians) tend to have a big impact on the Forex market.

    The GDP (Gross Domestic Product), the PCE (Personal Consumption Expenditures) and the CPI (Consumer Price Index), as well as the unemployment rate and the number of jobs generated, are usually the stats that cause the most fluctuation.

    If the forecast for a country’s currency is favourable or bad, news traders can take advantage of heightened price volatility by influencing demand for a specific currency.

  2. Carry trading

    Keep in mind that you do not trade individual currencies on the currency market, but rather currency pairs. At the same time, you’re acquiring one currency and releasing another.

    Holding a currency pair position for more than one day will result in overnight fees, which can be paid or received depending on the direction of your two holdings (long or short).

    For the currency carry trade to work, there must be a difference in the funding rates for each of the two currencies involved. If you borrow money at a low interest rate, you can use it to buy a higher-interest-rate currency and make money from the difference.

    Carry traders have long relied on the Yen and the Australian Dollar, both of which have extremely low interest rates, as a favoured currency pair.

    Because of the low overnight swap rates available to retail traders, it is more difficult to execute a carry transaction.

    If the forecast for a country’s currency is favourable or bad, news traders can take advantage of heightened price volatility by influencing demand for a specific currency.

Advantages of fundamental analysis

  1. Allows traders to understand price movements

    Market prices can be immediately influenced by major economic news and publications. When the numbers for an economic release are unexpected or dramatically depart from the consensus numbers, this is especially true, and can be understood with fundamental analysis.

  2. Allows traders to pinpoint valuations

    A monetary value can be assigned to any financial instrument or asset. A trader’s task is to look for assets where the genuine value of an asset is being undervalued by the present market price.

    When it comes to analysing currency movements, currency analysts can use fundamental analysis to look at aspects such as interest rates, inflation, consumer sentiment, industrial output, and more.

  3. Allows traders to analyse long-term trends

    With fundamental research, traders may get a handle on the long-term trend of a currency or asset. The vast majority of the information contained in economic reports is evaluated on a relative basis.

    Consider, for example, how today’s unemployment rates compare to those from the previous month, quarter, and year.

    This will help us understand the present trend in unemployment, and we can then use that information, along with other economic statistics, to anticipate the long-term influence on the price of a currency pair.

Understanding technical analysis

Based on the examination of previous price movements, technical analysis is a forecasting tool. Technical analysis is sometimes referred to as an art rather than a science.

Trying to predict future price movements with technical analysis has numerous complexities, which might lead to conflicting findings.

Price data is the primary tool for technical analysis. An analyst can use technical analysis to make informed decisions in the markets by monitoring current price action and using that to compare it with past price movements in the market.

Markets such as stock indices, currencies and commodities as well as individual companies can be studied using technical analysis. Technical analysis can be useful as long as a market has sufficient liquidity and is not easily influenced by outside forces.

In the opinion of technical analysts, the present market price reflects all known facts. The price of a security is swiftly affected by any new information that is made public.

The technical analyst believes that the market has a predictable and non-random tendency that can be noticed by the trained eye. There is a tendency for a trend to arise from trading range activity, and then the trend matures before returning to a consolidation stage.

The pricing data on the markets exhibits a repeating and recursive nature. While there are no two price patterns that are exactly alike, there are some similarities that cannot be explained away by randomness or noise.

Chart formations, candlestick patterns, momentum footprints, volume, and other price-related data show these patterns, and therefore are included in the toolkit of the technical analyst.

  1. Support and resistance strategies using technical analysis

    Using trendlines and other technical indicators, it is possible to identify places where an asset’s price trend is about to reverse.

    If the price is in an upward trend, a trendline connecting substantial higher lows is called an ascending support trend line. If the price is in a downtrend, trendlines connect major lower highs – a falling resistance trend line.

    As such, the trend of a financial asset can only be predicted by the levels of support and resistance that it faces.

    The levels at which prices could reverse to begin a new trend or a new movement within the primary trend are likewise represented by these levels of prices.

    These zones show areas where bulls and bears have fought for control of the market in the past, indicating a “battle.”

    It’s vital to keep in mind that in technical analysis there is an assumption that the past tends to repeat itself, thus market psychology plays a role here as well.

    Support levels are typically where the bulls take control of the bears, preventing prices from falling further. A resistance level, on the other hand, is a point at which the bears seize control and attempt to halt the price rise.

Advantages of technical analysis

  1. It can be applied over multiple timeframes

    Whatever your trading style is (short-term, intermediate-term, or long-term), you can benefit from using technical analysis tools in your decision-making process.

  2. It is great for understanding trends

    In order to determine the current trend of the market, a technical analyst can employ a variety of various techniques and studies. The most common of these include moving averages, trend lines, channels, swing highs and lows, as well as support and resistance levels, among many others.

  3. It can allow you to hone your market timing

    The major responsibility of a trader is to identify the best trading opportunities that are accessible and then to execute the deal at the appropriate time.

    Technical analysis tools assist traders in initiating, managing, and exiting their positions in a scientific and efficient manner, using a variety of indicators.

  4. It allows you to develop algorithms

    Algorithmic trading methods can be created using many of the concepts found in technical analysis. Automated trading systems can help alleviate some of the stress and anxiety associated with trading.

    Once you’ve set up your trading system’s rules, you can step back and let the algorithm do the work for you.

  5. It can allow you to get a ‘read’ on the market

    A greater understanding of market mood extremes can be gained by analysing price movement and chart analysis. You’ll be able to identify extremes in investor sentiment during both run-ups and selloffs.

    Moreover, you’ll get a better sense of where future demand and supply will be, allowing you to take advantage of market opportunities before your competitors do.

Final Thoughts

When it comes to market analysis, there are two main approaches: fundamental and technical. Most traders, though, will fall into one of two categories, which aren’t mutually exclusive.

Fundamental and technical analysis each have their own perks and disadvantages when it comes to analysis. Both tactics can work for you, and deciding which one is best comes down to your own personal trading style and goals.

Best Forex Trading Economic News Websites | IFX Brokers

Best forex trading economic news websites

Forex trading is defined by speculation on varying currency price fluctuations, which are fundamentally affected by the impacts of global news announcements and economic events.

As such, it is of primary importance for traders to conduct news analysis before speculating on a trade, and to do so, they will need a reliable news source dedicated to the events that matter most on the Forex markets.

In this article we have rounded by the best Forex trading news and economic websites that give traders unparalleled insight into the most important economic and political events.

1. Bloomberg

When it comes to financial news, there’s no better source than Bloomberg. It is a 24-hour source of news, analysis, and financial statistics. It serves as a trove of news and entertainment for those looking for something to do in their spare time.

Added to this, banks and other financial organizations can use a trading terminal provided by the website’s creators.

It’s a one-stop analytical and news outlet. The webpage is further separated into tabs for easy navigation and reference (Commodities, Stocks, Rates & Bonds, Currencies, Futures, Economics, Fixed Income, ETFs, and Sectors).

It is an easy-to-use service that allows all users, no matter where they are in the world, to have a voice. The United States, Europe, Asia, Africa, the Middle East, and Japan are all included in this region. In order to be a good forex trader, this is a must-have item in your toolbox!

2. Financemagnates

Financemagnates is a forex website that has been specifically built for individuals who speak English and Russian. Users have the option of switching from English and Russian or vice versa.

News, information, events, thought leadership, and other important elements are abundant on the website, making it a valuable resource for any forex trader. Visitors and registered users are both welcome on the website.

3. Fxstreet

To learn more about the forex market, you may check out Fxstreet’s extensive list of forex brokers and their latest news and analysis in real time. They also provide currency exchange rates and a comprehensive economic calendar.

In terms of forex websites, it is regarded as one of the greatest currently available. Cryptos have their own dedicated section as well, and there are also some nice touches to the website’s design.

4. Forexfactory

When it comes to online forex trading, Forexfactory is one of the best. Everyone who has an internet connection on a computer or mobile device can access it. It’s easy to use and has a nice layout.

Visitors and registered users alike can view the site. There is a wealth of beneficial information and materials for forex traders in the forum section, including professional advisors, methods, and downloadable publications.

This site’s users will appreciate the trade stream and live accounts feature, which displays real-time trading.

In addition, the website’s currency calendar can be adjusted to meet a certain purpose, such as the past seven days or the coming week. An extensive directory of forex brokers may be found on the website as well.

5. Forexpeacearmy

Forexpeacearmy is where all the action takes place. The information on this site that is based on personal experience is usually verifiable.

According to the company’s name, Forexpeacearmy, they help resolve disputes that may arise between customers and the service providers who provide them with various forex goods. True to their name, they are indeed excellent.

Because of their counsel and investigations of some forex service providers, they’ve helped save many thousands of dollars for their clients in their forex traders’ court over the years.

They offer the best reviews, strategies, information, and tools around. Scam alerts, a traders’ court, forums, and a beginners’ boot camp are all part of their dedicated community.

It is well acknowledged that they conduct themselves with objectivity and professionalism at all times. They employ no equivocation in exposing the corruption in the Forex market, as they rely on advertising on their website, which attracts more than five million visitors each year.

6. Tradingview

Tradingview is a forex website that offers free membership to anyone who wishes to make use of their services. Use of the website does require a free registration in order to gain access to the entire contents of their available content.

The website boasts an extremely feature-rich user interface. Without having to download any software, such as MT4 or MT5, one might start trading charts immediately on demand.

As a result, it makes it easier to see charts on mobile phones and tablets by providing them with their URL. Real-time updates are made to the charts. It also includes an economic calendar that is always up to date.

7. Forexcrunch

Because of its focus on simplicity, the Forexcrunch website is designed to look like a blog page. Despite its straightforward appearance, it possesses all of the necessary information for a successful forex trader.

The navigation through the website contents does not appropriate. It delivers a full weekly forecast of events as well as a daily outlook of the same. It, like other websites on this list, features a very comprehensive live forex calendar.

8. Netdania

Tradable rates from 10 prominent worldwide liquidity providers are displayed in real time on the Netdania platform in the form of the best Bid and Ask prices. The webpage is extremely user-friendly.

As a bonus, they offer free NetDania’s “Live Trading Webinars.” They feature an extensive news area, just as any other top forex website.

9. Investopedia

Investopedia is an online source for financial and investment information. Simply because of the extensive information provided under the ‘academy’ page, this website may legitimately be dubbed the “University of Forex”.

It has everything a trader needs to succeed in the forex market. Focus topics include wealth management, financial advisors and personal finance, as well as trading and other financial topics.

Investing for Beginners, Finding Great Value Stocks, Cryptocurrency for Beginners, and Financial Modelling are all included in the Academy tab.

10. DailyForex

For anyone interested in forex trading, DailyForex is a must-have website to include on your favourites bar. The website has numerous ‘review’ sections dedicated to a wide range of topics.

It also provides a signal service for trading. To be sure, there are a ton of useful tools and information on the site, including a daily forex mobile app and widgets.

There is a free demo account available on the daily forex website for people who are eager to try the Forex market with real money. As a result, it has earned a spot on this list of the best forex websites.

11. Forexlive

Every forex trader’s arsenal should include Forexlive as a top-notch resource for learning about the currency market.

The website has a variety of sections, including crypto currency, technical analysis, an economic calendar, a directory of forex brokers, a thorough educational section, real-time market quotes and charts, forex orders, and other useful forex tools.

 

Additionally, social trading (which allows novices to mimic the actions of an experienced trader) is an important element of the site, and this tool can be accessed with little or no prior understanding of trading.

For long-term and sustainable earnings, however, it is still recommended that aspiring traders learn the ins and outs of trading rather than relying on the advice of others.

12. Babypips

When considering the finest forex websites, Babypips is a must-visit option. The design and simplicity of the website are excellent, and works well along the website’s focus as a program for developing new traders from the ground up.

Due to its capacity to communicate in basic and plain language, it has established a niche in the forex education market.

13. Investing.com

The stock market, cryptocurrency, commodities, and, of course, the FX market are all covered in detail on this website.

They divide their writings into two categories: political and economic. Along with that, traders will like their live charting features that highlight key events and candlestick patterns that can be used to time their entry into or exit from a trade.

Additionally, Investing.com provides a wide range of technical tools and information for traders who want to make their judgments based on the analysis of the market.

In addition to pivot points and moving averages, they also have most of the key technical indicators available to help traders with their trading.

Finally, by publishing personal finance articles under “Money,” Investing.com hopes to educate traders and investors around the world about the importance of money management.

14. ForexNews

If you’re looking to diversify your trading portfolio, this site is for you. Articles about the daily markets and other trade items are among the many things it publishes.

You can also acquire information about brokers based on your level of experience, such as whether you are a rookie or have been working in the industry for some time.

Under their finance area, ForexNews focuses on business news, which is ideal for stock market participants. When it comes to forex news, this site is one of the best because of the quality of its content.