Pros and cons of using technology and fundamental analysis in Forex

Forex traders basically use two main methods to analyze the market. They are technical and fundamental analysis. A purely technical analyst would say that it is impossible to trade news because the market is changing so fast that any news on the chart will tell you. On the other hand, fundamentalists will say that only news can drive the market. Technical indicators are always followers. So what methods should we use? To find out, let's take a look at the pros and cons of the two methods.

technical analysis
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  Technical analysis involves tracking past currency price movements and using indicators to help determine where the current price may go. This analysis can be performed manually or automatically. Under the automated system, traders use software [expert advisors] or robots to help them find deals and identify entry points. Technical traders believe that all the necessary information to make a trade is included in the chart.

Fundamental analysis
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  Fundamental analysis looks at the main potential economic, financial and political factors that determine the direction of money prices. Fundamental traders believe that currency movements, regardless of their strengths and weaknesses, are related to the strength of the economic, financial and political situation. Therefore, basic reports and news are important to them. News and reports such as interest rates, employment, trade balance and GDP are very important. Other information such as retail, durable goods, home sales and ISM will also affect price movements.

technical analysis

Benefit
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  – It helps to provide traders with specific entry and exit points during the transaction.
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  – Charts give everyone an easy way to easily identify trends. This is possible because millions of traders are also monitoring the same data, and as a result, if a large number of Forex traders do this, they may generate self-fulfilling prophecies to further strengthen the trend.
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  – It focuses on charts and indicators. There is no doubt that this is by far the simplest and most accurate method used by many traders.
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  – Charts and tools can sometimes help point out when the trend is about to start or end. Therefore, it helps traders to plan profits and stop losses more accurately.

Disadvantage
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  – If many traders place the stop loss in the same area, it may cause the price trend to reverse, as this may cause larger players on the market to intentionally trigger these stops.
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  – The tools used are basically lagging indicators. The assumption that it is entirely dependent on current prices and trends to predict future prices can be dangerous. They often do this, but not necessarily.
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  – Total dependence on the chart means you may not pick up other signals that may change the trend.

Fundamental analysis

Benefit
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  -Basic analysis can increase our understanding and understanding of the global market. Therefore, it helps us to understand more clearly the overall health of the world economy.
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  – We can use basic analysis to explain some unexpected changes in price. Therefore, know the reason for the price increase or decline.
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  – When there is a large difference between expected and actual results, major news releases can sometimes cause large price fluctuations. If you can predict and master this price trend, then it will be very profitable.
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  – Fundamental analysis can be better used to predict long-term exchange rate movements.

Disadvantage
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  – Too much information is easy to confuse.
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  – It is difficult to use all of this information to determine the specific entry or exit point to be traded.
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  – Sometimes a short-term press release may provide a false signal and mislead the trader to open a trade. This signal usually causes a knee-jerk reaction in the market.
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  – Sometimes published information or news may have been priced in the market. Therefore, this information has no significant impact on price changes.
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  – It requires a person with at least some basic knowledge of the economic background.
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  – As the foreign exchange market tries to digest news, news releases can sometimes lead to dramatic and rapid price fluctuations in the up and down direction of the currency pair. Inexperienced traders may find themselves caught in a series of losses.

in conclusion
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  I don't think there is an ideal or best way to analyze foreign exchange to ensure you always get 100% profit. Technical analysis and charts will help short-term traders make decisions, and long-term traders will need to keep abreast of the latest economic news and data related to the national currency they trade. Please note that these analysis methods are just tools. If used correctly, it usually helps you trade more efficiently. This is why most Forex traders tend to use two analytical methods to make trading decisions.