Technical or Fundamental Trader?
The two schools are called FUNDAMENTAL and TECHNICAL and for the record I am primarily a technical trader. In a nutshell, the fundamental trader believes that a share's performance is based on the fundamentals of the company ( hence the name ) such as PE ratio, profit/loss, balance sheets, management, ratios, business forecasts - the sort of information that is contained in a small forest of paper provided to shareholders.
The technical trader however believes that the future performance is based purely on one simple piece of information, namely the price chart for the instrument. They believe that all the information about a company's performance is encapsulated in this simple chart. This is not an unreasonable assumption since the price reflects past performance, and is dictated by market conditions throughout the trading day. ( You may also hear the term chartist - this is the same thing ) In essence it is the ability to analyse a price chart in order to predict future price movements.
One of the key points to understand is that even though, as a technical trader you will principally be studying charts, fundamental data does play a part, but only on a large scale. You use fundamental analysis to determine what part of the business cycle the economy is in and therefore which industries offer the best growth potential. Then you would use that information to identify groups of target stocks, and finally use technical analysis of the price charts to follow trends and select prospects.
As a technical trader who trades currency for a living, I make virtually all my trading decisions based on the candlestick charts and whether I therefore believe a currency pair is likely to rise or fall. I have assumed that all the relevant information has been factored into the charts by all the other millions of traders around the world. However, I do take account of broad major fundamental economics such as interest rates, GDP, and inflation although the final decision is always based on the analysis of the price charts.
Related Tags: stocks, shares, options, trading, investing, forex, currency, fx, bull, bear, calls, puts, charts, candlesticks
Anna Coulling is a full time currency trader providing free advice and help to women traders and investors around the world via her web site. She has been trading for over 15 years, and has experience in a wide range of financial instruments including stocks,shares,options,spread betting and futures. For more information or to contact Anna please click on the link below : trading,investing,forex,currency,covered calls,options,puts,stocks,shares.
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