Forex glossary of terms
Technical analysis vs fundamental analysis
Are you about to begin your investment in forex or any other investment market? In order to make a successful debut in the world of investments, you are expected to be equipped with answers to most creepy questions. Every new investor is trapped while making a better choice between technical analysis and fundamental analysis. While both these terms have their respective fanatics and conservatives, you need to choose your path to help your money grow on the land of investment.
Basic Points of Distinction for Layman
For a beginner level investor, it is essential to draft some simple definitions for both concepts of analysis. Fundamental analysis is to carry out in-depth analysis of factors and events, which play significant roles in taking the decision for a particular investment. These factors can relate to political, economical and financial movements at national as well as international level.
On the other hand, technical analysis is to adjudge the next expected movement of a particular investment and is thus based upon tools like charts, financial patterns and investment trends.
Drawing Line between Causes and Effects
Fundamental analysis helps an investor to consider the causes for behavior of an investment entity, while technical analysis neglects the causes. Instead of worrying about the root causes, a technical analyst considers the effects of behavior exhibited by the investment entity. However, the fact could not be overlooked that both forms of analysis have common characteristics at one stage of investment or another. Thus, one can expect the followers of these two paths to deviate and use opposite track to fuel their investment journey.
Long Term vs. Short Term Investments
The length of investment also brings out a serious difference between two types of investment analysis. While long term investors are seemed to prefer fundamental analysis to reap a good investment crop, the short term investors, as a surprise, fuse the characteristics of both these concepts to make their investment effective and rewarding. Long term investments demand comprehensive analysis of the history of investment entity. On the other hand, a short term investment can be risked against partial evaluation of fundamentals and partial knowledge of latest trends.
Entertaining Different Purpose while Investing
While making an investment, you have to take correct decision regarding selection of right investment plan, entry and exit points in the market and so on. So, different purposes are required to be entertained with different concepts. For instance, fundamental analysis can help you to weed out unworthy investments and choose right plans for your hard-earned money. At the same time, you can follow the outlook of a technician to evaluate the entry and exit points in the investment market.
In other words, fundamental analysis informs you about where to invest, while technical analysis informs you about when to invest.
A Useful Quote for You
"One of the crucial differences between fundamentals and technicals in this respect is that fundamental analysis is about taking a lot of data and applying a few rules, whereas technical analysis involves a little data (prices and volume) and a lot of rules."
The source of these lines helped to bring another difference between two concepts of investment analysis. The though is self-explanatory, as it evaluates the nature of both the concepts.
The conclusion of this discussion chooses a middle way to reach its culmination. Investment is a serious step for any type of investor and thus, it must be taken after complete evaluation of all associated factors. Thus, in order to fill all the loopholes, be a fundamentalist as well as a technician while putting your money to hard work.
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