Is Fundamental Analysis Better Than Technical Analysis?

is fundamental analysis better than technical analysisI am not going to name names here, but i was watching a video from a well respected Forex training provider today, and it prompted me to write this article.

His training course is heavily weighted towards the premise that you will have more success if you use fundamental analysis rather than technical analysis.

The provider stated that professional traders, hedge funds, investment banks etc, are 80% fundamental and 20% technical. All of their trading decisions are based on macroeconomics and they are just using a 20% technical approach to help with market entries.

Now this is all perfectly reasonable, and i teach fundamental as well as technical analysis in my training course, but is fundamental analysis better than technical analysis? I don’t think it is.

Fundamental analysis will only give you an opinion of the market direction, and opinion is subjective. Sometimes your opinion is correct, and sometimes its incorrect. Just because you think something is going to happen, does not mean it will happen.

There has been a strong fundamental case for a number of months now, for the BOJ to expand on monetary easing, but they have not done it as yet. So if you have been buying yen pairs based on that, then you are in a bit of bother right now.

Putting fundamental analysis to the ultimate test.

Now is a great time to put fundamental analysis to the ultimate test. Lets take the Brexit vote for example. Now if Fundamental analysis was the best thing since sliced bread, and you were a hedge fund trader, or an investment bank, you would have been on the right side of the Brexit move.

Now do a search on Google to find out how many of these guys were on the right side of that move. There are 1000’s of hedge funds and investment banks, but it seems only 1 guy made any serious money on the move. And that was Crispin Odey. Crispin is a well respected hedge fund guy and he made 220 million on Brexit. See Brexit buccaneer rakes in £220million.

I would just like to point out that Crispin manages an 8 billion fund. So although he made 220 million, he only made a 2.75% return on that particular trade. Yes i agree its not too shabby, but people need the facts i think.

If the title of the article was “Brexit buccaneer rakes in 2.75%” it would not have the same ring to it now would it. :-)

Here are a few sentences from that article.

A hedge fund tycoon made more than £220 million for himself and his investors yesterday after betting on Brexit.

As many in the City nursed heavy losses, staunch Leave supporter Crispin Odey declared: ‘I think I may be the winner.’

He is one of a handful of hedge fund bosses to have hit the jackpot after taking big ‘short’ positions on company stocks and sterling, betting on their value falling in the aftermath of a vote to Leave.

Now please pay attention to the words “a handful”. So out of the 1000’s of investment bankers and hedge funds a handful got it right.

If you actually looked at all the trades that were taken in the hours of the Brexit vote, you would probably find that traders that rely solely on technical analysis, did far better from that move than the fundamental guys did.

Mr Odey also revealed his trading position had left him in line for huge losses if financial markets had risen, and he had lost his gamble.

So he picked a side, and gambled his investors money, and was correct. Do you think we would have been told about his huge losses if the gamble had gone against him? Well you are not hearing about the other hedge fund guys who gambled the wrong way are you.

Can i just make a point here that i do not like the word gamble, as trading is not about gambling. You take calculated risks based on high probability, and the higher the probability, the more success you will have.

So why do hedge funds and investment banks rely heavily on fundamental analysis and not on technical analysis?

The main reason is, they are managing huge sums of money, and they cannot enter and exit the market as a retail trader would. They have to build up a position, and an opinion over time, they add or subtract from that position as the fundamentals change.

To enter and exit the market with one trade would not only spook the market, it would also leave them in a vulnerable position should the market move against them. They have to hedge in and out of the market, building up an average price for their holdings, hence the term hedge fund. This strategy leaves them less exposed to currency fluctuations than they would be if they were all in, all out.

Retail traders can trade this way too if they know how to do it, but it does not mean that this way is better. It does not mean that fundamental analysis is any better than technical analysis, its just a safer way to trade large sums of money.

How i trade the Forex market?

I personally trade 70% technical and 30% fundamental. And when i say technical i am talking about reading a chart rather than reading a news story. People get technical analysis confused with indicators. They think that technical analysis is putting moving averages on your chart and waiting until they cross.

I trade by reading a chart correctly, and understanding what makes the market move. If you look at my article on the Brexit trade, you will see that the trade was purely based on chart reading. No fundamentals were involved at all in that trade.

Almost everyone that trades fundamentals got that trade wrong, but if you had been trading primarily from a technical standpoint, you would have had a much better chance of success.

So to all the trading providers out there that are telling people the reason they are losing money in the market is because they are trading technical analysis i say this.

The reason they are losing money is because they do not know how to trade.

It has nothing to do with fundamental or technical analysis. You do not need to know anything at all about fundamental analysis to make money in the Forex market, and that’s 100% true and i can prove it.

Fundamental analysis is not the answer to consistent profitability.

So if you are a technical trader that is losing money, and you are considering paying some of these training providers to teach you how to trade fundamentals like hedge funds and investment banks, just think about the Brexit trade. I am not saying what they teach is not going to help you, but its not the answer to consistent profitability that they make it out to be.

Courses that offer to teach you the fundamentals of trading are the in thing at the moment, and a lot of training providers are jumping on the bandwagon to offer this because of the failings of traditional technical based training providers.

Some retail traders think that by taking a course on fundamental analysis they will find the holy grail, but this is not the case. Fundamental analysis is just one approach to trading, and it does not guarantee you trading success. I make a lot more money in a lot less time with my chart reading skills, than i could ever make by following fundamentals.

I know what these guys teach, but they do not know what i teach. So just think about that, when you are considering whether to pay these guys, or to pay me to teach you how to trade.

You get the best of both worlds with my training course. :-)

The Brexit Trade.

The chart below shows the entry and exit points for the Brexit trade. GBP JPY was preferred over Cable as the Yen safe haven flows combined with Sterling selling produced the most pips.

One of my many strategies clearly shows the entry and exit levels for this trade, which could have banked you over 2600 pips.

This trade is based on just one simple strategy that i use to trade the markets. I have many strategies that i can teach you in my Forex training course.

The Brexit Trade

I know what you are thinking, that i have just drawn 2 lines on the chart, one at the top of the move, and one at the bottom, but let me just say this for all you doubters out there. I can with 100% confidence show you why one of my strategies clearly identified these 2 points on the chart for entry and exit of this trade. If you trust me and enroll on my Forex training course i will tell you why this trade worked, and show you many other high probability trades like this.

Please don’t get my training course confused with all the other crap out there. I will teach you what no one else can teach you. If you want to really understand the market, and be in a position to profit from trades like this, then please contact me for an informal chat.

Have a great day and thanks for visiting.

Do You Really Want To Be A Profitable Forex Trader?

Does that sound like a silly question? Its not. Its a perfectly reasonable question, but think about it a while before you answer it.

People get involved in this business for many reasons, but the main reason people get into this business is to make more money, and to have more free time. But the strange thing is, for the majority of people that trade the Forex market the reverse happens, they have less free time and less money.

Even for the majority of profitable traders, time spent in front of the screen in proportion to the money they make is not even minimum wage. Out of the 5% of traders that consistently make money from Forex trading, only about 10% of them actually make it to the point where they are making life changing amounts of money.

improve your trading resultsWhy is this? The answer is simple, the driving force behind most peoples foray into the Forex business is money. They want to make money, and lots of it. So what is wrong with that you ask. Nothing at all. 20% of the worlds wealthiest people have made their money in the finance industry.

So whats the problem? Well the problem is you have to be good at your job if you want to make money, and the better you are at it, the more money you will make. You cant say i want to make more money next week than i made this week. That will only happen if you are a better trader next week than you are this week.

So now answer the question, do you want to make money, or do you want to be a great Forex trader. If you want to make money, forget about trading and contact me about my managed account service.

If you want to be a great trader then contact me about my Forex training course.

Is it possible to make life changing amounts of money from Forex trading?

Yes it is. But to make life changing money from the Forex business you have to be a great trader. Most people fail in this business because they want to make money, they don’t want to be great traders.

Any job that requires you to have a skill requires a period of training, an apprenticeship to be a tradesman lasts for 4 years, doctors, vets, solicitors study for much longer than that. So why do people think they can enter this business with no skill, and make lots of money very quickly.

new life

Because its easy right? Forex trading is really easy, and anyone can do it, you just need to pay a few 100 dollars for a training course, set up an account with a broker, and you are on your way to your first million. In reality that will not happen, and for the majority of new traders making a million from trading is just a pipe dream.

Here’s a question for you. How do you walk away from this business after 12 months with a million pound in your account? You start with 10 million. :)

To be a great Forex trader you have to have, education, determination, discipline, and a skin as thick as a rhino. I have been in the trading business for many years, and there is nothing else i enjoy more than taking money out of the market, but the reason i can do that is because i am a great trader. I always wanted to be a trader, and i will always be a trader. Making money from the markets is a by product of being a great trader.

Most traders make money by pure luck rather than judgement. Think about this for a minute and this is 100% true. If you closed your eyes and randomly hit the buy or sell button, you would have more successful trades than the average retail Forex trader. I am not going to go into detail of why that is true, but it is.

A complete understanding of the market and the forces that drive price is the only thing that will make you a great trader, and consistent profitability will be within your reach. So if you do not have that understanding, and you feel that there is something missing from your trading methodology, then please feel free to contact me for an informal chat, about how i can help you become a great trader and take your trading to the next level.

Now answer the question again, do you really want to be a profitable Forex trader?

Thanks for visiting my blog, have a great day. :)