There are two main types of analysis. Fundamental or technical analysis.
Fundamental analysis studies factors that consist of macroeconomic and global events, individual country’s economy. Use data such as inflation numbers, interest rates, CPI reports, employment and unemployment rate and political conditions of the individual country.
Technical analysis purely looks at the charts. Historical price and trends, patterns. And they use this information forecast where the price would go. There are two types of technical analysis too, discretionary and algorithm based. A chart shows a visual representation of how buys and sellers psychology has unfolded in the past.
Lets take a look at few differences between them
1, Fundamental analysis tends to look at global macro events to make financial decisions. Ideal for long term investments as opposed to technical analysis. Technical analysis evaluates price and it’s forecast based on price movement. Mostly used for short to medium term trading but it can support fundamental analysis on long term investments.
2, Technical analysis shows us what trend the instrument is currently in. You can use tools and strategies such as Elliott Wave Theory, Support & Resistance, Trend Line. And indicators such as RSI, Moving Averages, MACD and Stochastic. Fundamental analysis shows the current shift in the global economy and determines decision the investor wants to make for the future.
3, The main argument on each analysis is that sometimes fundamental analysis does not provide the full context of the price movement. Whereas technical analysis cannot always guarantee that history can repeat.
4, The aim of fundamental analysis is to purchase an instrument that is under-valued. But that does guarantee that an instrument that is under-valued would increase in value in the future. This is where technical analysis helps us to identify where and when the price of an instrument would be seeking to trend.
Here at Elliott Wave Forecast, we use a combination of Elliott Wave theory and other technical strategies. We have our own strategy based on technical analysis that works for us the same way a fundamental analyst would be using their strategy that works for them.
Here is a guide to our guide to learning the Elliott Wave Theory. https://elliottwave-forecast.com/elliott-wave-theory/Back