Online trading has become more developed and accessible than ever. Nowadays, a few clicks are enough for anyone to become a trader, either on stock or Forex market, or on some of binary platforms. However, signing up with the broker or visiting the online market is not enough. If you want to be successful in online trading, you are supposed to make correct predictions and right decisions. This is where technical and fundamental analyses can help you.
What are they for?
Technical and fundamental analyses are techniques for analyzing the market in order to predict its movements. Whether you will choose technical or fundamental analysis depends on the market on which you trade and the trading strategy you apply.
Fundamental analysis relies on the historic data about the market. It is based on the assumption that all market movements occur in regular cycles, so the analysts aim to determine the patterns. Technical analysis takes into consideration more fundamental influences on market movements. Geopolitical situation, inflation, supply and demand are only some of the factors affecting the results of fundamental analysis.
Generally speaking, both analyses can be applied to all types of trading. However, short-term traders (like day or swing traders) can benefit more from technical analysis. On the other hand, fundamental analysis is suitable for those who trade on long-terms. Generally speaking, binary traders and day and swing traders on stock and Forex market will use technical analysis. Position traders are more likely to use fundamental analysis, since they leave the positions open in stock and Forex markets for long periods of time.
It is important to know that performing the analysis is only one of the aspects of trading success. You also need to spread the funds cleverly and choose a reliable and decent broker. Go to Cybermentors to find out more.
Similarities and differences
Fundamental analysts believe that the market price of a stock does not always match the true value of the company that the stock represents. Technical analysts believe that the fundamental elements of the stock’s value are already accounted for in the stock’s price. They also believe that the prices move in trends and that historical patterns in the market and in stock prices tend to repeat.
Fundamental analysts collect all the available data about the company, its financial statements and other, and only then decide whether to invest in stocks or not. Similarly, if they invest in Forex, they analyze the events in the countries of the currencies and in the world. Technical analysts observe the price charts of different stocks or currencies in the market. They analyze which assets performed the best and look for a pattern that shows which assets performed the best over time.
Even though technical analysis is used in short-term trades, these traders can still apply fundamental analysis. Even though they do not have much use of long-term predictions, there are some other benefits. They can learn how the market works and how one event affects the other, which will make them more successful and self-confident in any trading they pursue.