Technical Analysis vs. Fundamental Analysis
Updated
- Technical analysis focuses solely on the price action. It provides a visual trajectory of the stock’s price movement by utilizing charts and indicators. Technical analysis utilizes chart-based tools to identify historical price patterns to help forecast the direction of the stock, while identifying areas of price support and resistance.
- Fundamental analysis focuses on the financial and qualitative metrics of the underlying business. Data is derived from news, press releases and financial filings with regulatory agencies.
Which is better ?
The question of which is better relies on the purpose of the analysis.
- Day and swing trading focuses mostly on short-term intra and multi day price action and rely heavily on technical analysis to profit from price patterns.
- Long-term investing relies more on fundamental analysis.
While both forms of analysis should be utilized, a heavier emphasis on one or the other is required in most cases.
A trader needs to be fluent in both forms of analysis to compete effectively. The days of past where traders could trade solely on new releases is long gone. High frequency trading and algorithmic trading programs have the advantage of speed and limitless capital. They can react to news releases in milliseconds taking away any speed advantage for a news-based trader, who often ends up chasing the liquidity. For this reason, traders need to be able to not only have effective charting but also an understanding of how the crowd will react to the news. A seasoned trader focuses on the seamless shifting between technical and fundamental analysis as the trade dictates. Integrating both skill sets helps to galvanize the trader’s defense and offense, allowing him to sidestep and coattail the algorithms or avoid completely intra-day by shifting to longer time frames.
speedtrader.com/technical-analysis-versus-fundamental-analysis/
Said this, it is interesting how crypto market follows perfectly what written above.
The most of us think that if market crashes or rallies is because some news has come out. In my opinion as a trader, most of the time, it's not like this. News is an instrument that is used from seasoned trader, big players, institutional investors to amplify a movement that TA has already written on charts, that needs only to get triggered.
How we can see from the chart above, in a bull market, news has been used to crash market in support areas (mostly daily MA100, MA50) where seasoned trader, big players, institutional investor can place their entries.
- Fundamental analysis focuses on the financial and qualitative metrics of the underlying business. Data is derived from news, press releases and financial filings with regulatory agencies.
Which is better ?
The question of which is better relies on the purpose of the analysis.
- Day and swing trading focuses mostly on short-term intra and multi day price action and rely heavily on technical analysis to profit from price patterns.
- Long-term investing relies more on fundamental analysis.
While both forms of analysis should be utilized, a heavier emphasis on one or the other is required in most cases.
A trader needs to be fluent in both forms of analysis to compete effectively. The days of past where traders could trade solely on new releases is long gone. High frequency trading and algorithmic trading programs have the advantage of speed and limitless capital. They can react to news releases in milliseconds taking away any speed advantage for a news-based trader, who often ends up chasing the liquidity. For this reason, traders need to be able to not only have effective charting but also an understanding of how the crowd will react to the news. A seasoned trader focuses on the seamless shifting between technical and fundamental analysis as the trade dictates. Integrating both skill sets helps to galvanize the trader’s defense and offense, allowing him to sidestep and coattail the algorithms or avoid completely intra-day by shifting to longer time frames.
speedtrader.com/technical-analysis-versus-fundamental-analysis/
Said this, it is interesting how crypto market follows perfectly what written above.
The most of us think that if market crashes or rallies is because some news has come out. In my opinion as a trader, most of the time, it's not like this. News is an instrument that is used from seasoned trader, big players, institutional investors to amplify a movement that TA has already written on charts, that needs only to get triggered.
How we can see from the chart above, in a bull market, news has been used to crash market in support areas (mostly daily MA100, MA50) where seasoned trader, big players, institutional investor can place their entries.
Comment
Target hit. Bam
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