$ 1 million question!

In your long journey as an avid Forex trader, you will find that any type of fan analysis has its two fires.

Technical analysis (TA) involves putting together charts to identify patterns or trends, and fundamental analysis (FA) involves putting together economic reports and data and news headlines.

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Two-fire traders in the technical analysis camp shout, “Fundamental analysis does not matter! It is already included in the price and you can see it in the charts! ”

Two-fire traders in the fundamental analysis camp shout: “Technical analysis is just a series of lines of drawing and imagination! ”

Meanwhile, people are sitting in the emotion analysis camp watching these two camps and watching the level of their emotions from each other!  But what is the best kind of Forex analysis?

The three types of forex analysis are complementary

Fortunately, different types of market analysis complement each other.

Even two-fire technical traders may find useful fundamental analysis that can help their technical analysis. And vice versa.

In real markets, prices are constantly changing and usually create trends. These price changes affect fundamental analysis.

This means that price trends affect fundamental analysis just as fundamental analysis affects prices.

And as you will see in later lessons, identifying trends is an important part of technical analysis.

Do not be fooled by extremists in any of these analyzes! Neither is better than the other… They are all just different angles to look at the market.

In the end, you have to trade based on the analysis that you are comfortable with and that is profitable for you.

In short, technical analysis is the study of currency price movements on charts, while fundamental analysis looks at how countries’ economies are doing today.

Analysis of market sentiment determines whether the market is bullish or bullish in terms of its current or future outlook.

Fundamental factors shape emotions, and technical analysis helps us visualize these emotions and apply a framework for building our trading system.

All three types of analytics work together to give you good forex trading ideas.

All price and economic movements and records are available – just think and reflect and test these analytical skills!

Three pillars of technical analysis, fundamental analysis and emotion analysis

Let us bring out those tripods again to emphasize only the importance of all three types of analysis.

 

What is the best type of analysis in Forex?

If you remove one or two of these tripods, it will shake, right ?!

To become a true Forex trader, you need to know how to use these three types of market analysis effectively.

Do not you believe?

Let’s take an example of how focusing on just one type of analysis can be catastrophic.

• Suppose you look at your charts and hunt for a good trading opportunity.
• You just think about the money that is going to fall from the sky and so you get excited.
• You say to yourself, “Oh, I have never seen a more complete trading opportunity than this on GBP / USD. I love my charts. Peach, jump in your throat! ”
• Then with a big smile on your face (the kind that shows all your teeth) you buy GBP / USD.
• You also take a selfie of this big grin and post it on Instagram.
• Then you do a happy dance and post it on Facebook.
• But wait! Suddenly the position of 100 pips moves in the opposite direction!
• Unfortunately, Britain told the European Union at this moment that Gore Babat had left!
• Because you only look at the charts, you do not know what the European Union is at all. So you do a Google search for it.
• You understand that the European Union is an economic and political union with 28 European countries and allows free trade, which means that goods can be transferred between member countries without any additional checks or fees.
• God bless you! You just realized that if Britain wanted to do that, it would probably be serious. Their economy may be flattened. Many people may lose their jobs.
• Suddenly, everyone’s feelings towards the British market become sour and everyone trades in the opposite direction!
• Your big fat smile fades and you get angry at your charts.
• You spread your computer on the ground and start shredding it. (You take a picture of it and tweet it).
• You have lost a handful of money and now your computer has become a billion particles. (But your tweet now has a million likes.)
• And all this because you completely ignored fundamental analysis and emotional analysis.

(Note: This was not a true story. This has never happened to us. We have never been so naive. We are always smart traders… We just wanted to create an image in your mind with too much irony 🙂)

Well, a little hot onion, but you got the hang of it.

Do you remember when your grandmother used to tell you as a child that it is not good to overdo anything?

Well, you may have thought that he was talking nonsense at the time, but in Forex, that is exactly what happened when deciding to use this type of analysis.

Do not trust just one.

However, you must learn to balance the use of all of them. Only then can you really make the most of your trading.

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