Which is the best among technical, fundamental and sentiment?
Which is the best among the three?
If you are debating which analysis is the best to use, do not stress because one should not be better than the other and vice versa. These three are there for a reason, and people, especially traders, should take advantage of them. It is irrelevant to debate on the best type of analysis one can use. These three complements each other.
They all have their strong points, and a wise trader should take advantage of them. They say that technical analysis is the framework that studies the price movement using charts to look for patterns and trends. Fundamental analysis is analyzing economic data and news releases, and headlines that impact the price and market.
There is no point in debating.
Some technical analysts and traders may argue that fundamental analysis is not relevant since you can already see it on the charts. We also have pro-fundamental analyses that may say that charts and patterns are nothing compared to real-time news and happenings worldwide that impact currency pairs. This should not be the case because only analysis helps the other in making the market picture better. Furthermore, some data from the fundamental analysis can help make better technical analysis and vice versa. Technical analyses that identify trends and look at price movements also affect the fundamentals. There is no point in being one-sided when it comes to market analyses.
Technical, fundamental, and sentiment
Let us define them better one by one. Technical analysis studies a currency’s price movement through charts. Fundamental analysis checks the economy’s status and how it affects prices. Finally, sentiment analysis weighs whether we have a bullish or a bearish market based on the current or future fundamental perspective.
So, if we think about it, fundamentals play a significant factor in sentiment. On the other hand, the technical analysis makes us see the sentiment while applying a framework to help us make better trading decisions. Again, they complement one another to help traders like us.
Let us cite a scenario.
Tin wants to trade EUR / USD currency pair. She used technical analysis where she saw that it is a great trading opportunity based on the charts. However, the price turns out to be moving in the opposite direction with a difference of 150 pips. She went online and researched what is happening between Europe and the USD. She saw that there was an economic situation involving massive unemployment and recession. To make it worse, everyone’s sentiment went in the opposite direction. Tin lost enormous money since she only focused on the charts and failed to make fundamental and sentiment analyses.
To cap it off
There is no need to focus on one market analysis, and there is no competition between the three. They are all there to help traders like us to make better trading decisions. We do not want our money to go to waste because of neglecting our responsibilities to check all possible angles where a trade can go wrong.