While fundamental analysis to predict price movement with translating various information state of the economy, including news, reports, and policies issued by the Government, as well as the growing rumors. Then it can be said to be the second major approach is the analysis on the financial markets.
Between Technical and Fundamental
In technical analysis, when a trader based on a graph, then he will see the graphics signal as a guide entry. For example, new traders will entry when prices had broken through the lines of trend line or lines on the MACD quarters. However, if later the price really is moving according to the signal, this does not mean that such indicators of patterns that cause price movement!
The above events are more caused by a large number of traders are based on these lines. At the time, they are doing the same (buy or LONG) according to the theory of corresponding indicators. So, it should be noted that technical indicators are mere as a follower and not a cause of the movement of a price.
While in fundamental analysis, drastic price movements are believed to occur when there is an unexpected event. These events are usually a rise or drop in interest rates from the central bank, to the political events or wars. An example is the events of 9/11. When the events of 9/11 happened, weakened due to USD rate everyone predicted the event will affect the US so likely USD weakening. This incident caused many market participants sell USD. The effects, rate USD really went down drastically.
Which Is More Influential?
In General, major banks, hedge fund, and other large financial institutions using archetypal fundamental analysis. And because they are the holders of a majority of the money all over the world, so if they make a trade, prices will move according to what they do. This is in accordance with the laws of the economy, for instance when there are many buyers USD, then the amount of USD in circulation in the market will be reduced, causing the price of USD goes up.
Then what about the traders who use technical analysis? It is certain they do not have the amount of money as much as financial institutions above (although the combined in total). Plus various technical indicators that add up to hundreds and timeframe varies, it can cause any indicators and timeframe that generates predictions vary widely.
Can Both Of Them Merged?
The difference between the two approaches to this analysis is like the Earth and sky, but many traders moved to prove that they can achieve the success that was satisfactory with the second dwarf combines these in their trading. For example, from some fundamental analysts also use technically to learn the best time of open positions.
On the other hand, some traders consider technical analysis fundamental also to increase the accuracy of their technical signal. Any way you choose, the two approaches above, it is very beneficial to strengthen the signal and help confirm your decision in making the best trading scenario.
Conclusion
For those of you who use technical analysis, tips that we provide are: Just use common indicators are widely used by traders and trading only when there is no important economic news. For those of you who are accustomed to using fundamental analysis, tips that we provide are: patience, discipline, trading only when there is important economic news and make sure the time you use is really appropriate.
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