Fundamental Analysis and Technical Analysis Comparison

There is a debate among the investors about Fundamental Analysis and Technical Analysis. I wrote detailed articles about both analysis techniques before. In this article, I am going to talk about advantages and disadvantages of each analysis method.  Which technique is better and more successful? Which technique is more suitable for you?

While some traders concentrate only on one technique, some traders use both techniques together. If you are thinking watching price action, finding technical levels, using technical indicators and reading graphics are more important to than economic data and central bank policies, then using technical analysis is more suitable for you.

On the other hand, if you feel more comfortable trading by following economic and political developments, interest rate decisions or central banker speeches, this means fundamental analysis is more beneficial for your trading style.

If you are wondering my opinion, as I mentioned before that using both fundamental and technical analysis methods combined is the best option. However, trading psychology and controlling your emotions is the key factor here.

While fundamental analysis focuses on financial data and economic outlooks, technical analysis focuses on price movements and market psychology. Fundamental analysis gathers data from financial statements and technical analysis gather data from the charts. Also another difference between them, fundamental analysis looks backward and forward while technical analysis looks only backward.

Advantages & Disadvantages

Let’s talk about the advantages and disadvantages of both analysis techniques. Fundamental analysis uses analytical methods. Because the methods that are using while doing fundamental analysis are based on financial data. Fundamental analysis also analyzes long-term economic trends. And with the help of the analytical and statistical tools, the fundamental analysis gives you better buy or sell options. I can say these are some of the best advantages of fundamental analysis. But doing fundamental analysis requires experience and may take a lot of your time.

On another hand, technical analysis tells you where and when to enter & exit a trade. Also, you can use patterns to determine the direction of trends. By following traders sentiments you can know how the market is working. However, using too many indicators or formations at the same time may confuse your head. And ignoring all fundamental developments can be risky while using technical analysis.

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