Why Fundamental Analysis Is Important
Forex trading training has certainly exploded and had a massive impact, which has become big business in recent years. We see it in all areas of our lives now with the most prominent being on various social media platforms. For someone who isn’t aware or who hasn’t traded on the financial markets before, it can be quite alluring to see all these marketing images and videos of people driving round big cities, wearing expensive watches in flashy cars. However the truth is a bitter pill to swallow, and is plagued with many bumps in the road ready to trip you up and take your money.
One of the first things that new traders come across when they learn forex trading is the need for a strategy, and they are usually pushed to go down the route of using technical analysis, which is the analysis of assets based on statistics gathered from the movement of the asset. Traders are often misled into thinking that price action is the way forward when trading, which is the observation of recent and actual price movements, rather than relying on technical indicators. Although this analysis might have some part to play when trading, it isn’t the be all and end all. If there is one thing that you take away from this article, make it be this. “You should never trade using just technical analysis.”
However, there is another form of analysis that is much more important and is actually used by professional traders at big institutions when they learn forex. I am talking about fundamental analysis, which is the method of studying an asset to ascertain its intrinsic value. This is done by analyzing important economic, financial and qualitative and quantitative characteristics and has a lot more weight behind it than technical analysis or price action. Retail traders on the other hand are always so sure about technical analysis and are too quick to write off fundamental analysis.