How To Combine Technical & Fundamental Analysis?
This video will explain how you can use technical analysis to compliment fundamental analysis.
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After a couple of questions about combining technical analysis with fundamental analysis, we've decided to just do a quick video to explain this in a little bit more detail.
So in order to combine these two analysis methods together, or do so correctly, we first need to understand what each of them were designed to do, and how they were intended to be used.
We need to make sure that we are using technical and fundamental analysis in the ways that they were intended to be used. So starting with finding a trade direction, and the right time to trade, that is where our fundamental analysis will come into play.
We basically do that by evaluating which currencies are strong and weak and expected to remain strong and remain weak based on their macro fundamental bias, the short term sentiment, whether that is based on intermarket analysis or risk sentiment.
This will tell us which currencies we should be trading, which of them are expecting to be strong and weak, and then of course, that'll give us the right direction to be trading in line with that currency pair, and of course based on the type of sentiment that we're trading, that'll also give us the time that we should be trading.
For example, just because we're expecting a central bank, let's call it Central Bank A, to cut rates, and Central Bank B to hike rates, that doesn't necessarily mean that the currency pay for those two currencies are an automatic buy or sell. Ideally, we would want to time our entries so that the current short term sentiment is also aligned with that broader view of the macro fundamentals.
So once you have your currency pay and your direction you need to trade in, then you can use one of the many many technical indicators or technical strategies out there to your advantage, whether that is using indicators, or using support and resistance or supply and demand, or chart patterns, or candlesticks, whatever.
It doesn't really matter or make a difference as most technical strategies should work much better if you already know in which direction you should be trading. So keep in mind that many traders don't sometimes even rely on any of that, and only use basics like support and resistance structures, and don't even use candlestick charts, they just use line charts once they know in which direction they should be trading.
So just to summarize, we use the fundamentals to show us what to trade, and in which direction to trade, and then of course, when to trade it.
And when we have that in place, of course we can use the technicals to give us the high probability entries and exit zones on the chart.
So that is just a quick way of how we can look to combine something like technical analysis and fundamental analysis, and use them from the right ways in which they were intended to be done. So I hope that helps.
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If you find this content helpful, you’ll love Forex Source.
There’s a link below were you can learn more about it
https://bit.ly/2HFykNd
----
We interpret and explain price moves in real-time, 24 hours a day. Our team of analysts produce text, video and audio commentary.
You understand the markets and trade with confidence. Learn more at our website here: https://bit.ly/2HFykNd
-----
After a couple of questions about combining technical analysis with fundamental analysis, we've decided to just do a quick video to explain this in a little bit more detail.
So in order to combine these two analysis methods together, or do so correctly, we first need to understand what each of them were designed to do, and how they were intended to be used.
We need to make sure that we are using technical and fundamental analysis in the ways that they were intended to be used. So starting with finding a trade direction, and the right time to trade, that is where our fundamental analysis will come into play.
We basically do that by evaluating which currencies are strong and weak and expected to remain strong and remain weak based on their macro fundamental bias, the short term sentiment, whether that is based on intermarket analysis or risk sentiment.
This will tell us which currencies we should be trading, which of them are expecting to be strong and weak, and then of course, that'll give us the right direction to be trading in line with that currency pair, and of course based on the type of sentiment that we're trading, that'll also give us the time that we should be trading.
For example, just because we're expecting a central bank, let's call it Central Bank A, to cut rates, and Central Bank B to hike rates, that doesn't necessarily mean that the currency pay for those two currencies are an automatic buy or sell. Ideally, we would want to time our entries so that the current short term sentiment is also aligned with that broader view of the macro fundamentals.
So once you have your currency pay and your direction you need to trade in, then you can use one of the many many technical indicators or technical strategies out there to your advantage, whether that is using indicators, or using support and resistance or supply and demand, or chart patterns, or candlesticks, whatever.
It doesn't really matter or make a difference as most technical strategies should work much better if you already know in which direction you should be trading. So keep in mind that many traders don't sometimes even rely on any of that, and only use basics like support and resistance structures, and don't even use candlestick charts, they just use line charts once they know in which direction they should be trading.
So just to summarize, we use the fundamentals to show us what to trade, and in which direction to trade, and then of course, when to trade it.
And when we have that in place, of course we can use the technicals to give us the high probability entries and exit zones on the chart.
So that is just a quick way of how we can look to combine something like technical analysis and fundamental analysis, and use them from the right ways in which they were intended to be done. So I hope that helps.
-----
If you find this content helpful, you’ll love Forex Source.
There’s a link below were you can learn more about it
https://bit.ly/2HFykNd
