What Difference Between Fundamental and Technical Analysis

What Difference Between Fundamental and Technical Analysis

There are many ways to do analysis. in general, people use fundamental analysis and technical analysis. when you hear the word analysis, many people immediately frown. people who are not accustomed to doing analysis actually become frustrated. so many people depend on other people's recommendations or spontaneous luck. I'm sure at least you can do a simple analysis. in this article will be explained about technical analysis in a simple but quite in-depth. thus this article can be your guide as a trader or investor

As explained earlier, there are two analytical techniques commonly used by traders to find out and predict the price movements of a financial instrument:

  1. Fundamental analysis takes into account various factors, such as a country's economic conditions, economic policies, both macro and micro. From the macro side, it can be seen whether the country's economic conditions are still healthy or not. While on a micro scale, fundamental analysis is used to find out the valuation of a financial instrument, at what nominal price is appropriate for a particular currency, stock, or commodity. In principle, a fundamental analysis is used to find out whether an OVERVALUED or UNDERVALUED price
  2. Technical analysis is a technique that analyzes price fluctuations in a certain time frame or in relation to other factors such as transaction volume. Because of that many technical analysis using graphics. From this movement, certain patterns can be seen that can be used as a basis for buying or selling. Basically, technical analysis is used to determine whether a currency price is OVERBOUGHT or OVERSOLD

Ideally, you should master both of these analytical techniques. This is actually a choice. There are those who prefer to use fundamental analysis, others who prefer technical analysis. Both can complement each other, so that not infrequently many people use both at once.

But it is understandable that many people find it difficult to master both, because it takes ability and sufficient time. As an alternative, you can master one first. As an emphasis, if you are a medium or long term type of trader, or as an investor, you should master fundamental analysis. Whereas if you are a trader with a short-term horizon then you should have to master technical analysis.

For ordinary people, technical analysis is easier to learn than fundamental analysis because it only needs to be able to read graphs. Whereas fundamental analysis requires at least knowledge of macro and micro economics

Even if only with technical analysis, you will be able to maximize your profits in trading, if you can use it properly.

 

Technical Analysis Function

Every trader or investor has a simple question. Do I have to buy or sell right now? Will the price go up? Or will it actually go down? You might expect technical analysis to be able to provide definitive answers to this question. But you might be disappointed. Technical analysis is not able to provide 100% correct answers. Technical analysis can indeed provide buy or sell signals, but the results cannot be ascertained 100% correct. According to empirical experience, experts say, it is said that the technical accuracy of the analysis is a maximum of 60% -70%.

Then what's the use of technical analysis? technical analysis can be your trading guide. Trading without a guide is the same as playing gambling. If you hope that technical analysis can improve the way you trade or invest, you are right.

 

Next read What are the Principles of Technical Analysis

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