Technical vs Fundamental Analysis

What Is Technical Analysis?

Technical analysis is a method of predicting future price movement by studying historical price data, volume, and chart patterns. This approach assumes that all relevant information is already reflected in the price, and that price patterns tend to repeat due to similar market psychology.

Common tools used in technical analysis include: candlestick patterns, support and resistance levels, indicators like Moving Average and RSI, and trend lines.

What Is Fundamental Analysis?

Fundamental analysis focuses on economic, political, and social factors that affect the value of a currency or asset. In forex, this includes central bank interest rate policy, inflation data, unemployment figures, GDP growth, and a country's geopolitical stability.

Traders who use fundamental analysis believe that price will eventually reflect a country's real economic condition, even though in the short term price can be highly volatile due to market sentiment.

Quick Comparison

Combining Both Approaches

Many experienced traders use a combination of both — fundamental analysis to determine medium-term directional bias, and technical analysis to pinpoint precise entry and exit points. Neither approach is "more correct"; they're different tools for reading the market from different angles.