Select Page

Fundamental or Technical Analysis

Technical Analysis

Sponsored Content

steemit

Visit on Steemit!

Support us on Steemit!

bitcoinlgoo

Visit on D.Tube!

Support us on D.Tube!

Curriculum Content

Firstly, and most importantly, Technical Analysis should not be seen as a sole generator for your investment or trade ideas. Technical analysis is often used by people completely unfamiliar with an asset to select an asset to trade, presuming they have a substantial amount about the underlying fundamentals simply from viewing price charts. Studying technical indicators of an asset without studying the underlying asset’s fundamentals or studying how the asset is affected by economic cycles is not recommended. Technical analysis is almost completely backward looking. The future impact of economic trends on underlying companies and firm fundamentals should determine what and how you trade, not simply a price chart alone.

Both Not Or

Technical and fundamental analysis are often seen as contrary, but this is untrue. Fundamentals are studied to reveal the intrinsic value of a company at a point and time, and the time period measured immediately before that time. After this time, those values become increasingly outdated, although they should be referenced for historical value until updated fundamentals are released. Additionally, released fundamentals affect the psychology of people purchasing and selling the asset, and encourages them to buy or sell. In short: Fundamentals show the company level impacts on supply and demand and thus price.

Technical analysis is the practice of using past pricing information on charts to predict future pricing trends. A chartist attempts to predict the future from an evidence-based viewpoint, taking positions based on signals suggesting a trend will continue or reverse in the future. These trends are driven by individual buyers and sellers quickly reacting in order to swiftly acquire profits and avoid losses.

Technicals Faster but Fundamentals Eventually Win

The result can be represented with a simple example: A manufacturing company releases a financial report showing the income from its operations. It reveals 5 million in revenue from 5,000 goods produced by two factories, with each one responsible for 2,500 goods. Two days after this report is released, one of those factories burns to the ground. This will appear on the technical level far faster than it will appear at the fundamental level. Investors will rapidly unload the company’s shares in order to avoid losses incurred by other people unloading the investment, resulting in a sharp price decline on the technical chart level. The financial statements will not show the impact until the next reports are released. Technical analysts will see the impact instantly, even if they have not seen the reason shares fell off a cliff.

When the next report is released, current fundamentals and future fundamental expectations will be released by the company, with the most important being earnings. The price of each share for the company will be impacted by these expectations, and the market price will quickly adjust to better align with fundamentals. Over the next quarter, the market price will positively or negatively stray from the actual fundamental values, until the next report reveals actual hard numbers.

The evidence of technicals eventually aligning with fundamentals is even stronger on a macro-economic level. Markets have often been bid up beyond reasonable levels, only to crash in the future when the fundamental underpinnings of the market are revealed to be less stable than estimated. Examples include the subprime mortgage crisis and the dot-com crash. Traders buying trends based on technicals bought into long term trends far above their realistic fundamental value, only to realize prices should have been far lower at a later date, and only after taking large losses.

Seek Alignment in Positions

We should always use a systematic approach, picking economic, fundamental, sentimental, and technically aligned positions. Technical Analysis should not be used without an and sentiment bias. The goal of Technical Analysis is to time investment entries and exits. Technical Analysis is a filtering and timing mechanism for trades that pass our fundamental and sentimental biases.

Is a trade idea is generated from our fundamental bias? Move it to the sentiment level. Does your trade pass sentiment level screens? Move it to the technical level. Does the trade pass the technical level? Move it to the risk management level. Can we take the trade while retaining our risk management requirements? Enter into the trade position and watch for a technical analysis exit. Never take a trade only because it looks good at the technical level.

Did we help you? Vote with a Crypto-Donation!
steemit

Visit on Steemit!

Support us on Steemit!

bitcoinlgoo

Donate Bitcoin

141FSmuHkMSZVsQQtE9GHSPyj6gAonqqWR

bitcoinlgoo

Donate Dash

Xr4fdtP78Mh3gnVwAUjjuZRCq3kubaHZ5o

bitcoinlgoo

Donate Litecoin

LcrxGsshB2j9SddnZNdLfYMsDqAtw3Dr9v

bitcoinlgoo

Donate Iota

LXIVNBVHRYBOHRWNGMBNHOYMT9GBEFTPQMKDUZUYYHGMPXOOEYETMUQZXWXCGWBMTFERLW9LMCKNUDCKAMDOQCNDNZ

bitcoinlgoo

Visit on D.Tube!

Support us on D.Tube!

bitcoinlgoo

Donate Bitcoin Cash

14NCVeGCZfHf7tiy9N2Yz1mrBNi9m2mQ4S

bitcoinlgoo

Donate Ethereum

0xAF7d66B09F34833Ccec1Ed9e4D356D40c09698e5

bitcoinlgoo

Donate Ripple

raiZ2rCXLeBTUh2A4voKALZpMxQ88KxZxm

bitcoinlgoo

Donate Monero

42byh9AjzB3XXRptSeSfzAGC588HRZgVXAGMay6yYKjjAHinUxdQkxw3Ay1XcziXV86XY57aRqG5kGnJ8LFWmSjmAnUEnYh

International Economic Analysis:

  • Major Currency Economic Summaries
  • Performance of Major Imports and Exports
  • Mandates of Central Banks versus Expectations
  • Performance Indexes of Major Economies
  • Economically Correlated Currency Projections
  • Large Funds Currency Sentiment Readings
  • List of Technical Indicators to Look For
  • Occasional: Foregin Exchange Technicals Markups

American Markets Analysis:

  • Summaries of American Economic Structure
  • Performance of Major
  • Imports/Exports
  • Federal Reserve Mandate versus Expectations
  • Performance Indexes of U.S Economy
  • Economically Correlated U.S Dollar Projections
  • Large Trading Fund Index Sentiment Readings
  • Market Wide Earnings Versus Valuations
  • Fundamental Ranking of U.S Business Sectors
  • Best and Worst Future Consensus Estimates
  • Occasional: Firm Fundamental Strength Report
  • List of Technicals to Look for While Trading

WealthCE FX + Equity Analysis

Major 8 Economic Summaries
Economic Performance Index
Currency Market Sentiment
Equity Index Market Sentiment
Sector Strength Tracking
Equity EPS/PEG Estimates
Fundamental Firm Analysis
Trend Following Trading Plans

Robinhood is a SEC, FINRA, & SIPC member brokerage that lets you to buy and sell U.S. stocks/ETFS with ZERO commission. Sign up and get a free stock!

coinbase

Coinbase is a digital brokerage specializing in currencies. They allow you to trade US Dollars and Euros for Bitcoin, Bitcoin Cash, Ethereum, and Litecoin.

coinbase

MyFxChoice is a regulated brokerage offering 200:1 Leverage on Foreign Exchange, Gold, and Silver. They offer 33:1 on Crude oils and up to 50:1 on equity indices like the FTSE100, DAX30, S&P500, and Nikkei.

Forex Tester 3 is a technical analysis back testing and simulated trading platform that serves as a testing platform for trading strategies.

Ledger Nano S - The secure hardware wallet

Sponsored Content