Trading analysis: Are you a fundamental analyst or a technical analyst?

Julie Brownlee, Fsp Invest, 19 Aug. 2015

Tags: analysis, trading analysis, fundamental analysis, technical analysis, trading

When you start trading, you’ll need to find a type of analysis that works for you.

There are basically two schools of analysis: Fundamental analysis and technical analysis.

So what are the differences? And which one should you use?

Read on to find out more…

What is fundamental analysis?

Fundamental analysis comes down to the economics surrounding whatever you want to trade. Think supply and demand, and the impact of the price of the asset you trade.

If you’re trading shares, you’ll analyse a company’s financials and the impact they can have on its share price.

From all the data available about the asset you want to trade, you need to work out its intrinsic value. You then compare this to the market price and decide whether to go long or short.

What is technical analysis?

On the other hand, technical analysis ignores all of the factors above as technical analysts believe everything you need to know already reflects in the price of an asset.

To decide whether to go long or go short, technical analysts look at price charts of the assets they trade.

The basis of technical analysis is that price history repeats. By using a number of different indicators and tools on charts, technical analysts believe they can work out what’s going to happen.

What type of analysis is for you?

The type of analysis you use for trading is very much down to you. Chances are you’ll already have a preference.

If you have a trading strategy that works, keep using it.

Some traders use a combination of both fundamental and technical analysis.

It’s really down to you the type of analysis you use and what you’re happy with. You can try out both and see how your trades perform.

So there you have it. How to know if you’re a fundamental analyst or a technical analyst.

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