Forex Focus: Fundamentals Or Technicals? by Boris Schlossberg
When two are better than one: Power up your forex
trading by combining fundamental and technical analyses.
Arguments between technical and fundamental traders
often become fanatically intense as one side tries
to prove the other wrong. Technicians assert that all news is discounted in price almost instantaneously and
therefore fundamental knowledge is of little use in determining
the forward direction of the move. Fundamentalists state
that technical analysis offers nothing but the summary of the
past price action. After all, just as success in sports like tennis
depends not on where the ball is but where it is going, so too
in trading, profit and loss does not depend on where the price
stands currently but on where it will be in the future. Therefore,
fundamentalists argue, trading technically is akin to
driving a car by looking in the rear-view mirror.
Yet when it comes to the currency market, both technicians
and fundamentalists could benefit for each otherís analysis.
The currency market, which reflects the fortunes of nations
rather than individual companies, trades on big macro economic
ideas such as government economic reports, central
bank announcements, and political conflicts. It is therefore
quite sensitive to news surprises and tends to create sharp