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Technical Analysis vs Fundamental Analysis

Mon Jun 07 2021 14:45
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Is technical analysis a good way to analyze the trends of an asset or is fundamental analysis better? The battle between these two types of technical analysis is very popular. In recent months, this has been one of the most discussed topics in the trader community. 

From online forums to posts published by experts, you will find this topic everywhere. This is all because of confusion. Most traders are always confused about the choice of technical analysis and fundamental analysis. They don't know which is good for them and which they should choose. 

Dive into ultimate Technical Analysis vs Fundamental Analysis 

There are some methods to find out which one is better. Whether technical analysis or fundamental analysis is the best method. There are different opinions about the whole market. Some claim success with technical analysis while others attribute their success to fundamental analysis. 

Such information tends to make new traders confused. But today in this post, we will tell you about technical analysis and fundamental analysis in depth. So, without wasting time, let's start with this amazing post.   

About Technical Analysis 

First of all, let's talk about technical analysis. Technical analysis is used for complex analysis of assets in any market. Technical analysis is used by stock traders, but there are so many users of technical analysis from different markets as well. 

Forex traders, commodity traders and even crypto traders use it to find out the trend in the market. It is a completely computer-based analysis that requires less human intervention. That is why it is complex, yet available everywhere. 

History 

The history of technical analysis is very old. It was established a hundred years ago and has been used ever since. According to some research reports, technical analysis was invented in Asia. 

Technical analysis was performed with the help of candlesticks. It was invented in the 18th century. But it was not so popular at that time. After that, technical analysis changed in a few years. 

Importance 

Technical analysis is important because it benefits many forex traders and stock traders. The best thing about this analysis is that it is completely artificial. That is, it is completely computerized and automatic. You do not have to intervene here with technical analysis factors. This makes it even more beneficial for the traders.

Frequent Users 

If we talk about who are the frequent users of technical analysis, then there is a complex answer. Because almost all the markets out there have used technical analysis the most. 

But, if you still want to know who is making more money with technical analysis. Then facts and myths will tell you that forex traders and stock traders are frequent users.  

Applicable Markets 

As we mentioned earlier, almost all markets can use technical analysis. But, in some markets, it works best. From commodities to stocks, technical analysis applies to all markets.

Pros 

When we talk about the benefits of technical analysis. Then, there are a lot of things to consider. It is one of the most effective methods to find out the trend. It determines easy/entry points during trading. It allows you to get quick signals before anyone else in the market. Technical analysis provides you with detailed information.

Cons 

Delayed reaction time is the biggest problem traders face with technical analysis. As we mentioned in the benefits section, there are always early signals. And there are more chances that your early signals will fail. Different results of the two indicators are also a big problem.

Fundamental Analysis 

Fundamental analysis is a different thing than technical analysis. Fundamental analysis is done based on the fundamentals of an asset. Here in this type of analysis no historical data. 

Technical analysis uses historical data of an asset to create patterns. But here in fundamental analysis no historical data is used. In this type of analysis, the characteristics of an asset are used to analyze the trends.

History 

Fundamental analysis is considered a technique invented in the 20th century by Benjamin Graham. He used various techniques of fundamental analysis over his publications. After that, many traders adopted this technique to analyse different assets in different markets. Nowadays, this technique is very popular and used by many traders.

Importance 

It is essential for various market traders because it is easier than technical analysis. Traders do not need much experience and many even use it during beginner level trading.

Frequent Users 

If we talk about frequent users, then there are more users than technical analysis. Very few beginner level traders use technical analysis. But it depends on the market and its instruments whether fundamental analysis works or not.

Applicable Markets 

Most fundamental analysis applies to almost all types of markets. From commodity to stock traders, everyone uses fundamental analysis. Even securities and fixed income trading can use fundamental analysis.

Pros

It is considered more beneficial for long-term traders. That's not to say that short-term traders can't use fundamental analysis for their trading account. But most of the time, long-term traders refer to fundamental analysis. It is a low-risk technique to analyse the assets and the market.

Cons 

It uses different metrics while analysing different stocks or any other financial instrument. But this type of analysis is not as in-depth as technical analysis. 

So, there is a possibility that micro and macro level factors are not included while analysing the fundamentals. This means that not much information is provided in this type of analysis. 

Which One Is The Best? 

Now the final question is which of the two analysis is better than the other. All traders always want to use the analysis method that is more convenient and accurate. These two factors are most important for traders when choosing one of the two methods. 

So here we can see that these two factors are considered as the most important factors. As a beginner, you should use the method that is most convenient for you. But as an experienced trader, you need more accuracy. 

What You Should Choose? 

If we are looking for convenience more than accuracy, then fundamental analysis is the best for most traders. But on the other hand, if we are looking for more accuracy, then technical analysis sometimes wins over the other. But there are no fixed and certain results for any type of analysis you choose for your trading. 

Summary - Technical Analysis vs Fundamental Analysis

No matter what method of analysis you use, if you are not experienced, there will always be a risk. You cannot rely completely on any type of analysis. Analysis is used to get an idea about the price fluctuations or market trends. Choose between fundamental analysis vs technical analysis wisely. 

So whenever you choose a method of analysis, you need to educate yourself about that method. Without proper implementation, no trader can get any benefit from any analysis method. Start with the basic trading rules and then increase gradually for constant growth. Both analysis are profitable and it depends on how you use them.
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