Technical and Fundamental Analysis

I will expand on this section in the future with different strategies and better definitions and explanations, as well as the rest of this site. So, it may be over simplified or not as much information as I’d like to give but I would rather keep it simple for time’s sake. I, also, have to further develop my own knowledge base, experience, and techniques. In the future, I will offer more references, as well but I will be explaining much off the top of my head and with the time I have available.

You may have heard of technical and fundamental analysis. They are the basic tools needed in analyzing and managing a trade. Now, to be profitable, there is a need for risk management, an understanding of trading psychology, and trade management, to name a few tools that I think are most important. But these topics will be expanded on later, as well.

You may wonder, as I am often asked, what’s the difference between trading and gambling or is it basically the same thing? Depends on the situation and the trader. Personally, I think every trader gambles a little in the first few years. This is just the psychology of a normal human. Something looks to be simple enough, buy low, sell high, and who wouldn’t like to turn a little of anything into a lot, especially money that can be used to provide for our family and buy nice things.

It takes extreme discipline to be a successful and consistently profitable trader, with the key word there being “consistent.” You can find these fake gurus everywhere telling you how to flip $50 into $5,000 in 30 days, with their “holy grail” indicator that will turn your computer into a money printing machine that spits out dollars faster than the federal reserve. If you didn’t have to learn the hard way, then you were smart enough to realize the bs when you heard it. This doesn’t say much about anyone’s intelligence because these marketing gurus, which is all they really are, are more studied in selling products than trading and they make it sound very enticing.

I have heard of traders being able to produce major profits with little money in a short amount of time but if they’re not selling a product, they will let you know that you will NOT be able to do this in the first few years. Every trader that I have actually believed when they made this claim, had been trading for at least 15+ years. Most of them around 40 years and they’re still learning. It is a well known fact that 70-90% of traders fail. I will come out with another article soon that explains the most common reasons for this and what can be done.

Now, back to the topic at hand. The market is said to move at random and price is dependent on several different variables but understanding these variables is what separates trading from gambling. Some traders swear by fundamental analysis. A great definition for fundamental analysis is given at Investopedia: “Fundamental analysis (FA) is a method of measuring a security’s intrinsic value by examining related economic and financial factors. Fundamental analysts study anything that can affect the security’s value, from macroeconomic factors such as the state of the economy and industry conditions to microeconomic factors like the effectiveness of the company’s management.”

You can find different calendars online that have all the dates of earnings and dividends, along with different ratios found on a company’s financial statements for stocks and different economic events, such as a country’s retail sales or gross domestic product (GDP) in Forex. This data is easily accessible but understanding the importance of each event and how to properly interpret this data and what to do with the information in our projections or speculation of price, is the tricky part.

Most traders use a combination of technical and fundamental techniques. Still, others swear by only technical analysis, with their thesis being that everything you need to know in a specific market, is already figured in the price of the asset. Japanese candlesticks and bar charts show the main ingredients in technical analysis: every bar or candlestick has the open, the close, and the prices that were reached in between, depending on the time frame of the chart. For a one minute chart, every minute a new candlestick is formed, which shows where the price opened during that minute, every price established during that particular minute, and the closing price for the minute. After this, a new candlestick or bar is formed for the next minute. Higher time frames cancel out the “noise” in the market and display the same information within the specific time frame. So, for a 15 minute chart, it will produce this information every 15 minutes.

Here is the definition for technical analysis at investopedia: “Technical analysis is a trading discipline employed to evaluate investments and identify trading opportunities by analyzing statistical trends gathered from trading activity, such as price movement and volume.” My techniques heavily involves technical analysis. There are hundreds, if not thousands, of technical indicators and just as many or more strategies based on price, technical indicators, and fundamentals. As your knowledge and experience grows, you can combine your knowledge of this data, along with data from your trading journal, which you should definitely be using, to form new strategies or better understand price movement. As complicated as it seems and however random it may be, markets can only move three different directions, up, down, and sideways.

The pictures are different because forex.com did not save my info but you can see where the price is. I did extend the lines a bit, where I meant to initially draw them.

This article has run a bit longer than expected but at least I now have a chart completed to show my speculation of price in “real time.” I am not licensed to offer financial advice and am still developing as a trader but will have much more information in the future.

DISCLAIMER

Futures and options trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with money you can’t afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in this video or on this website. The past performance of any trading system or methodology is not necessarily indicative of future results. CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVERCOMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN. All trades, patterns, charts, systems, etc., discussed in this video or website and the product materials are for illustrative purposes only and not to be construed as specific advisory recommendations.