Trading Techniques  |  SEP 1999

Combining Technical And Fundamental Analysis by Mark C. Snead, Ph.D.

Combining Technical And Fundamental Analyses The two forms of analysis approach market forecasting in radically different styles. Can they be combined? Few topics generate as much heated discussion as the time-honored debate of technical vs. fundamental analysis. The two schools do, in fact, offer radically different approaches to market forecasting; fundamental analysis is concerned with identifying the relevant variables underlying price action, while technical analysis attempts to extract tradable information from price action itself. What is most interesting about this is the tendency for forecasters to rely solely on either fundamental or technical analysis. Many are merely following the conventional wisdom that each technique is logically more compatible with a given trading horizon. Because long-run movements in a market are ultimately steered by the underlying fundamentals, fundamental analysis is considered more suitable for long-term investors. Conversely, since short-term market movements are dominated by volatile price adjustments, technical analysis is the method of choice for most short-term traders.

by Mark C. Snead, Ph.D.