Lesson 44 of 69
Fundamental vs technical analysis
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There are two broad ways to form an opinion on a market. Fundamental analysis asks why price should move. Technical analysis asks when and where to act. They are not rivals; they answer different questions.
Fundamental analysis
- In forex it means interest rates above all: a central bank raising rates usually strengthens its currency, cutting usually weakens it.
- Then inflation (CPI), employment (US ), growth (GDP), and central bank language at press conferences.
- For gold: real yields, the US dollar, and safe-haven demand. For oil: OPEC supply, inventories, and global demand.
- For crypto: conditions, regulation, ETF flows and network adoption.
- Strength: it explains the big multi-month direction. Weakness: it gives you no entry, no stop, and no timing.
Technical analysis
- The assumption is that price already reflects everything known, so the chart is the fastest summary of the fundamentals.
- Tools: structure, and , patterns, , and .
- Strength: precise entries, defined invalidation, and a repeatable process you can test.
- Weakness: no chart pattern survives a surprise . Technicals describe behaviour, they do not predict news.
How beginners should combine them
Use the to know what is coming and to stay flat around high-impact releases. Use the fundamentals for a directional bias over weeks. Use the chart for the actual entry, stop and target. Bias from fundamentals, timing from technicals.
A worked example
Suppose the Federal Reserve signals more rate cuts while the European Central Bank holds. The fundamental bias is a weaker dollar, so you are looking to buy EUR/USD rather than sell it. That is the whole fundamental contribution — it filters out half the chart.
You then wait for the technicals: a pullback into a daily support level, a , a confirming above the pattern high, a stop under the , and a target at the previous resistance. The bias told you the direction; the chart told you the price, the risk and the moment.
What to ignore
- Predictions from anyone who cannot tell you where they would be wrong.
- Indicators stacked on indicators — five oscillators saying the same thing is one opinion, not five.
- News headlines after the move has already happened. Price usually moves on the expectation, not the announcement.
The honest summary
Fundamentals decide where a market is going over months. Technicals decide whether today's trade is worth taking. Beginners who master risk plus one clean technical setup outperform beginners who read every headline.
Key takeaways
- Fundamentals explain why a currency should be worth more or less.
- Technicals show where price is likely to react.
- Most traders use fundamentals for context and charts for timing.
- Neither approach predicts the future — both manage probability.
Knowledge check
3 quick questions — your best score is saved to your progress.
1. Fundamental analysis focuses on…
2. Technical analysis focuses on…
3. How do most traders combine them?
Progress is saved on this device.
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