Fundamental Analysis vs. Technical Analysis
It took me years of reading and observation to arrive at an educated conclusion as to how/if the news should influence my trading. It is definitely worth an article because I haven’t been able to find many others who actually write down these simple truths. Everywhere you look people warn you about not trading the news and others sell you $500/month news feed services like it will make a huge difference.
Firstly let me say that if I want instant numbers on any major news release I just go to LiveStation and watch CNBC for free. I don’t trade the news and never have done but nowadays if I do listen to news it is just to make sure that the numbers weren’t way off expectations and a shock to the market. This is too rare to go on about and I don’t believe much I hear or see on the TV anyway, in fact I remember years ago when Oil first went over $100 and every one was going on about buying oil, even a friend of mine was brain washed enough by the TV that he emailed me and told me to buy Oil, it was going to $200 was the hype. I went the other way and searched for good technical analysis signals to sell Oil, I thought it was a bit fishy EVERYONE agreeing like that and it worked out well for me.
Let’s move on though and talk about the role of news in the Market because I am not saying you can’t make money with the news, I just want to share with you my opinion on how there is an easier way to go about things. Nobody can deny the hard fact that Fundamentals drive the market; the news IS what moves the market. The problem with these news results is that big players have far more access to information than the regular Joe and anything important tends to get priced in to the news even before the release. The amount of layers involved with assessing all of the fundamentals influencing any particular currency can be a lot of work in itself. The great thing is you don’t need to bother with it all, awareness of what’s going on is fine but Technicals will always show you the way and are much easier to follow.
It is my conclusion that Technical Analysis provides you with the ability to read the market’s reaction to anything and everything. This essentially means that instead of trying to follow all the layers of Fundamental data for each country, through Technical Analysis you can read the whole lot in one place. I have seen so many trades set-up perfectly before news releases and I used to let upcoming news keep me out if it was too close time-wise. After many years of missing great trades due to these major news releases getting in my way I have finally seen enough, I now know that a MUCH higher percentage of these trades work out just fine than those that lose. So beware of the news and all the hype you read as you head down your Forex path, good Technical Analysis using solid price action techniques is all you need to reads the news and beyond.
The only thing left to mention is that you must educate yourself and create your trading plan around pure price action techniques, the price will show you everything and lead the way to your success. Any moving average or squiggly oscillator will always lag behind so to avoid the need to read the news, develop solid technical analysis through nothing but price action. Grab my free eBook if you want to learn more on the subject.