Forex Focus  |  NOV 2007

Forex Focus: Fundamentals Or Technicals? by Boris Schlossberg

Forex Focus: Fundamentals Or Technicals? by Boris Schlossberg When two are better than one: Power up your forex trading by combining fundamental and technical analyses. Arguments between technical and fundamental traders often become fanatically intense as one side tries to prove the other wrong. Technicians assert that all news is discounted in price almost instantaneously and therefore fundamental knowledge is of little use in determining the forward direction of the move. Fundamentalists state that technical analysis offers nothing but the summary of the past price action. After all, just as success in sports like tennis depends not on where the ball is but where it is going, so too in trading, profit and loss does not depend on where the price stands currently but on where it will be in the future. Therefore, fundamentalists argue, trading technically is akin to driving a car by looking in the rear-view mirror. THE FUNDAMENTALS Yet when it comes to the currency market, both technicians and fundamentalists could benefit for each other’s analysis. The currency market, which reflects the fortunes of nations rather than individual companies, trades on big macro economic ideas such as government economic reports, central bank announcements, and political conflicts. It is therefore quite sensitive to news surprises and tends to create sharp reactive moves.

by Boris Schlossberg