Technical and Fundamental Analysis are both tools used by traders to help determine a trading strategy. Both fundamental and technical analysis help traders to predict possible trends and future prices.
Technical Analysis; “The process of analysing a financial instrument’s historical prices and other statistics generated by market activity, in an effort to determine probable future prices”
Fundamental Analysis; “‘The determination of price based on future earnings – it focuses predominantly on factors such as the overall state of the economy, interest rates, production, earnings, and management”
Here it is put simply;
Technical analysis looks at past prices of an asset to predict future prices, and Fundamental Analysis believes that market movement is determined by macro and micro economic factors including interest rates, war, political unrest, recession, global economic depression etc.
Essentially the fundamentalist studies the cause of market movement, while the technician studies the effect
There are probably a million questions running through your mind;
So, let’s start from the very beginning…