Combining Fundamental and Technical Analysis for Stronger Trades
Combining both fundamental and technical analysis is one of the most important things that traders, especially beginners, focus on when attempting to get the most out of the market.
Combining these two approaches is crucial, especially for traders involved in long-term positions. Professionals often rely on integrating both methods. But
is it possible to combine them for medium and short-term trades as well?
The answer is yes, it can definitely be beneficial.
One of the best ways to combine the two on a short-term basis is by using the economic calendar.
By researching through it, you can find key news events affecting a particular currency. It’s important to study the news carefully, understand the expectations and outcomes, and use this information in alignment with technical analysis.
Example:
Let’s consider a news event about interest rates on the Euro. If there is an expectation that the interest rate will be reduced, this could be a strong signal of weakness for the Euro, at least in the short term. This would mean looking for selling opportunities against other currencies.
Here, the role of technical analysis comes in. We start by identifying the best currency pairs to sell the Euro against. For instance, if we find that the EUR/USD pair has reached a strong resistance level and is breaking a previous upward trend, this gives us a strong sell signal.
From a technical perspective, we could sell the pair, and from a fundamental perspective, the expected interest rate cut for the Euro could push the pair lower. Both the technical and fundamental analysis align in this case, providing us with a good opportunity to enter a sell trade and take advantage of the expected market movement.
This approach can be applied to other currencies and significant news events, such as inflation reports.
❇️ You can review the following report on how to work with the economic calendar for more insights on how to identify strong short-term trades. [Link]
Regarding long-term trading
here it's recommended to study several factors in more depth to get a clearer market outlook.
For example, looking at current events in the Arab region, the geopolitical situation, the Russia-Ukraine war, and the COVID-19 pandemic, each of these events served as a strong indication to focus on safe-haven currencies and assets. As these events unfolded, it became clear that the best strategy was to continue focusing on buying safe-haven assets.
A good example of this is gold, which saw a strong increase in value from the time of the COVID-19 pandemic through the Ukraine war and geopolitical events in the Arab region. As each of these issues escalated, gold continued to rise, proving to be the best choice for traders, especially those dealing with swing trades.
Traders focused on buying gold, looking for the best daily support and demand levels, and keeping an eye on developments to take new buy positions as the situation evolved.
(Notice How Gold Presented Many Strong Buying Opportunities and How It Reacted to Them)
There were many excellent investment opportunities that aligned with recent events, and gold respected technical analysis strongly. It continued to rise, surpassing all reversal levels. This was because it was supported not only by technical analysis but also by fundamental analysis.
Technical analysis provided buying opportunities, such as when prices reached support levels or demand zones. Additionally, price action patterns, such as Japanese candlesticks, supported the buy signal. Moving averages, for example, indicated the presence of an uptrend, reinforcing the idea of buying for the long term. From a fundamental perspective, there was significant escalation in recent times, with strong tensions in the Arab region, which further supported the idea of buying gold rather than selling it. This trend continues to hold true until now.
❇️ Summary of the Report:
When choosing your trading method, whether for long-term, daily, or short-term trades, it is essential to follow economic news and daily reports. Keep track of the situation in real-time to develop a good understanding and accurate expectations of the potential movement of the currency. Afterward, look for opportunities that align with these news events to secure the best trading opportunities with high success rates.
