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What exactly is the difference between fundamental and technical analysis? And why is it so important for the day trader to have an intimate knowledge of both styles of trading? Put simply, the majority of new traders who enter into the markets, filled with dreams of wealth, do not have a good enough foundation of knowledge with which to build up a successful trading career with. And precisely how does one build this knowledge? Begin with the basics of both technical trading and fundamental trading.

Technical trading is hugely favourite with intraday traders. If you are a new trader you will benefit from swift entry and exit from positions with a sound knowledge base of technical analysis. Put in the simplest way technical analysis means using past price data in order to determine future price movements. An example of this is using resistance and support price levels as a signal for price rises and falls in the near future. But let this not fool you – technical analysis goes much further than this.

Stochastics, moving averages, Fibonacci levels and countless other retracement levels are simply formulas based on past price information. Technical analysis encompasses all this which is why it is crucial that a day trader be familiar with them. It is not unusual to see a trading screen with many different representations of the price using different graphs and data – in fact this is why multiple personal screens are so common in the financial world.

If one combines this knowledge with that of fundamental analysis, you potentially have the capability to make brilliantly executed trades. And what is the difference? Fundamental trading is the method of using a companies financial results, combined with economic data and government statistics in order to make an informed and deliberated view of future price movement.

For example, if you have read that the price of gas is rising, and a current publicly traded utility company released very favourable results, this will signal to you to purchase that stock. Conversely, if unemployment was on the rise and average consequence were falling, you might wish to short sell an entertainment index. Fundamental analysis of stocks requires you to develop a good understanding of what you are actually trading, as opposed to technical trading, where you can be looking at any graph (stock, commodity, futures etc) and it wouldn’t matter because you are only concerned with price movement alone.

Clearly, technical trading is designed for swift in and out trades, where a time frame can last anywhere from a few hours to even a few seconds. This is why it is so favourite with day traders. Fundamental analysis on the other hand means taking a position where the timeframe is greater than a day (generally speaking).

So why would an intraday trader be interested in fundamental trading?

Speaking from experience, to be a successful trader means being healthy to read the markets. This is not an simple feat. You need to be healthy to tie up all the knots and read the signals which are being given to you by the market. Thus, having at least a basic grasp of the fundamentals of the market you are trading will become hugely beneficial in making you a superior day trader, and in turn, making superior profits.

Also don’t forget to keep a day trading diary to help you keep track of your winning and losing trades. You need to know what you are doing wrong in order to improve. Examining your trades can be fun – just kick back after a days trading, get a huge cup of hot chocolate, wearing your best all black converse sneakers and read what you did for the day.

In conclusion, I hope you now discern the importance of having a good knowledge of the two main styles of trading, and I encourage you to learn more if you feel you need to. Happy trading.

Is technical analysis really necessary for someone who is interested in swing trading? The beauty of swing trading is that it grants you to get in the market long enough to make a profit but get out soon enough before you suffer any huge draw downs due to unexpected market activity. Many new traders are unsure as to how much technical or fundamental analysis they should use. Can a swing trader be successful without any technical analysis? Likewise can they be successful with no fundamental analysis? If you want to be the ideal that you can be at trading then it is strongly advised that you mix a tiny of both into your swing trading so you can get the ideal of both worlds. Both technical and fundamental analysis play a major role in how swing traders make decisions and manage their trades regardless of the market they purchase and sell in.

Fundamental plays an important role in swing trading because the performance or expected future performance of a country’s economy can have a major impact on the value of its currency. Perhaps the biggest impact comes from a country’s interest rate. Interest rates can have a major impact on the value of a currency and this is one thing that professional swing traders constantly keep an eye on. When all things are equal, if a country’s interest rate is higher than another, the value of its currency should appreciate. The higher interest rate attracts foreign investment who must purchase the currency to enjoy the high interest rate level. This causes demand for the currency and hence explains why swing traders like to keep an eye on interest rate levels. They can greatly affect the value of a currency in both the short term and long term.

Technical analysis is also something that should not be neglected. Technical analysis is all about the analysis of charts and what they are telling us. This includes a wide varying number of things and can be as easy as examining the trend to using or plotting information on your chart via an indicator. Some traders might also implement the use of chart formations in their technical analysis. Technical analysis will most likely play a larger role than fundamental in your swing trading, but it should not absolutely dominant any market analysis you do before opening and closing trades.

Neither fundamental nor technical analysis should be the dominant player in any swing traders trades. Each style of analysis offers a swing trader critical information about the market and can greatly improve their chances of being a successful trader in the long run. Fundamental analysis gives traders a huge picture of market and the most important thing to keep an eye on is the level of current and future interest rates. These rates can greatly affect the value of a currency and will help give you an intent of where the market might be going. Technical analysis is necessary to refer the trend and place trades. Both styles of analysis work hand in hand with apiece offering a one-of-a-kind appearance and information about the market.