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Which Trading Strategy is the best: Technical vs. Fundamental Analysis?

Submitted by admin on January 25th, 2026

There are usually two broad approaches of trading that affect the trading decisions made: technical analysis and fundamental analysis. The two approaches seek to establish lucrative opportunities albeit they differ in terms of philosophy, tools, and application. The knowledge of these approaches would help the traders decide the one which suits their objectives the best or mix the two to achieve the best results.

Technical Analysis

Technical analysis involves the analysis of the price movement, volume and chart patterns to make predictions about future price patterns. The traders depend on moving averages, Relative Strength Index (RSI), MACD, Bollinger bands and candlestick patterns. The fundamental assumption of technical analysis is that price is a mirror of all the available information, and the past price patterns are likely to recur.

This strategy is particularly common with intraday traders, swing traders, and those who deal in short term. Technical analysis assists in determining trends, momentum, levels of support and resistance and accurate entry and exit points. Nevertheless, technical indicators are also prone to give incorrect signals, especially when the market is subjected to news or is extremely volatile.

Fundamental Analysis

Fundamental Analysis measures the intrinsic value of the asset based on the economic, financial and qualitative factors. In the case of stocks, this involves the earnings of the company, increase in revenues, balance sheets, quality of the management, and prospects of the industry. In the case of forex and commodities, the macroeconomic variables that are important include interest rates, inflation, GDP statistics and the central bank policies.

Long-term investors and positional traders usually use fundamental analysis. It also assists traders in knowing the hidden factors behind price changes and the assets that have high growth potential. Nevertheless, fundamental analysis does not necessarily help to formulate definite levels of entry and exit thus timing becomes more problematic.

Major Differences and Applications

Technical analysis is concerned with when to trade as opposed to fundamental analysis which is concerned with what to trade and the reason why. Technical traders respond to the price movement whereas fundamental traders predict market trends depending on value and economic patterns.

The mix of Technical and Fundamental Analysis

A combination of approach is applied by many traders who are experienced. The basic analysis assists in determining the existence of good assets or promising movement in the market whereas the technical analysis is applied to schedule the entry, exit, and mitigating risk. This mixed approach provides a better informed and balanced trading approach.

Which Approach Is Better?

No one of the best approaches exists. The decision will be based on the trading style, time horizon and level of risk. Mastering the techniques and the ability to use them at the right time can be very beneficial in the decision-making of a trader and his/her performance in general.