November 9th, 2016 → 1:43 pm @ reacoms
Financial markets generate huge volumes of information like annual and quarterly reports, earnings estimates, corporate insider’s reports, industry group studies, technology forecasts, weekly, daily, and intraday charts, technical analysis indicators, trading volume, opinions in chat rooms, and the never ending discussion circles on the Internet. With so much data, you soon realize your analysis can never be complete. Some traders who have lost money fall into paralysis from analysis. They develop a appealing conception that if they analyze more data, they will stop losing and become winners. You can recognize them by their beautiful charts and shelves crammed with stock reports. They will show you indicator signals in the middle of any chart, but when you ask them what they will do at the right edge, they only mumble because they do not trade. Analysts are paid to be right; traders are paid to be profitable. Those are two different goals, calling for different temperaments. Institutions tend to separate traders and analysts into different departments. Private traders have no such luxury. Analysis quickly reaches the point of diminishing returns. The goal is not to be complete but to develop a decision-making process and back it up with money management. You need to develop several analytic screens to reduce a huge volume of market information to a manageable size.
Fundamental analysts predict price movements on the basis of supply and demand. In stocks, they study supply and demand for company products. In futures they research supply and demand for commodities.
Some questions that arise in Fundamental Analysis like;
Has a company announced a new technological breakthrough?
An expansion abroad?
A new strategic partnership?
A new chief executive?
Anything that happens to the business can influence the supply of its products and their costs?
Almost everything that happens in society can influence the demand.
Fundamental analysis is hard because the importance of different factors changes with the passage of time. For example, during an economic expansion, fundamental analysts are likely to focus on growth rates, but during a recession, on the safety of dividends. A dividend may seem like a quaint relic in a go-go bull market, but when the chips are down the ultimate test of a stock is how much income it generates. A fundamental analyst must keep an eye on the crowd, as it shifts its attention from market share to technological innovation to whatever else preoccupies it at the moment. Fundamental analysts study values, but the relationship between values and prices is not direct. It is that mile-long rubber band all over again.
The job of a fundamental analyst in the futures markets is not much easier, it is a hard task.
How do you read the actions of the Reserve Bank, with its great power over interest rates and the economy?
How do you analyze weather reports during the critical growing seasons in the grain markets?
You can spend a lifetime learning the fundamentals, or you can look for capable people who sell their research. Fundamental analysis is much narrower than technical analysis.
In technical analysis a moving average works similarly in Crude Oil in MCX and NIFTY in NSE on weekly, daily, and intraday charts. MACD-Histogram flashes similar messages in COPPER (MCX) and BANK NIFTY (NSE). Should we forget about the fundamentals and concentrate on technical analysis?
Many traders take the path of slightest struggle; I think Fundamental factors are very important to a long term trader who wants to ride major trends for several months or years. If the fundamentals are bullish, we should favor the long side of the market, and if bearish, the short side. Fundamental analysis is less applicable to a short-term trader or a day-trader, they use technical analysis for their buy or sell trading decisions, since day –traders don’t hold any stocks, commodities or currency pairs for long term.
If you are a long term traders the better way for the highest accuracy and confident trade is use fundamental analysis and technical analysis both for making trading decisions. Many professional traders are success in following both fundamental and technical analysis, it is a proven technique. You do not have to become an expert in the fundamental analysis of every stock and commodity. There are very intelligent people who specialize in that, and they publish their research. Many of them also bang their heads against the walls; unable to understand why, if they know so much about their markets, they cannot make money trading. If we can take our ideas from fundamental analysts but filter them through technical analysis, we will be miles of head of those who analyze only fundamentals or technical’s. Bullish fundamentals must be confirmed by rising technical indicators; otherwise they are suspect. Bearish fundamentals must be confirmed by falling technical indicators. When fundamentals and technical’s are in gear, a trader can make consistent profit from trading like professional traders do.
Financial markets run on a two-party system—bulls and bears. Bulls push prices up, bears push them down, while charts show us their footprints. Technical analysis software like WinTrader Trading Systems study charts to find where one group overpowers the other. They look for repetitive price patterns, trying to recognize up trends or downtrends in their early stages and generate buy or sell signals. The role of technical analysis software in MCX, NSE, FOREX trading has changed over the years. Now most traders are depending on high performing technical analysis software which can able to bring them profit by giving high probability buy or sell signals. Technical analysis has become hugely popular since the 1980s. Easy access to personal computers has put technical software within easy reach of traders. The stock market has become increasingly short-term oriented in recent years; the fact is that market is driven by day traders. Gone are the days of “buy-and-hold” when people bought “good stocks” for the long run, put them away, and collected dividends. The pace of economic change is increasing, and stocks are moving faster and faster. New industries emerge, old ones sink, and many stocks have become more volatile than commodities. Technical analysis is well suited for those fast-paced changes. There are two main types of technical analysis: classical and computerized. Classical analysis is based solely on the study of charts, with- out using anything more complex than a pencil and ruler.
A professional trader looks for up trends and downtrends, support and resistance zones, as well as repetitive patterns, such as triangles and rectangles. It is an easy field to enter, but its main drawback is subjectivity. When a classical technician feels bullish, his ruler tends to inch up, and when he feels bearish, that ruler tends to slide down. Modern technical analysis relies on computerized indicators whose signals are much more objective. The two main types are trend- following indicators and oscillators. Trend-following indicators, such as moving averages, Directional System, and MACD (moving average convergence-divergence), help identify trends. Oscillators, such as Stochastic, Force Index, and Relative Strength Index (RSI) help identify reversals. It is important to select several indicators from both groups, set their parameters, and stay with them.
Professional traders often misuse technical analysis by looking for indicators that show them what they want to see. The main tool of technical analysis is neither the pencil nor the computer, but the organ that every analyst is supposed to have between his ears—the brain. Still, if two technicians are at the same level of development, the one with a computer has an advantage. Technical analysis is partly a science and partly an art partly objective and partly subjective. It relies on computerized methods, but it tracks crowd psychology, which can never be fully objective. Price patterns on our technical analysis software reveal crowd behavior. Many beginners, overwhelmed by the sheer volume of data, fall into the trap of automatic trading systems, in our experience using of automatic trading systems are the best way to lose your hard earned money. WinTrader Buy Sell signal Software is a trading system which will guide trader through highly accurate buy or sell entries and exit points with proper target and stop loss. A trader only have to follow WinTrader Buy Sell Signal Software instruction, since WinTrader Technical analysis system tested with all kind of market for the accuracy, only thing you need is just follow the instructions.
Whenever an excited beginner in trading tells me he is planning to buy an automatic system, I ask him what he does for a living and what would happen if I came to compete with him after buying an automatic decision making system in his field. People want to believe in magic, and if that magic can also save them from working and thinking, they gladly pay good money for it. Successful trading is based on the 3 M’s—Mind, Method, Money. Technical analysis, no matter how clever, is responsible for only one third of your success. You also need to have sound trading psychology and proper money management.
Hope you got some ideas about how important fundamental analysis and technical analysis in trading Commodity (MCX, COMEX, NCDEX), Stock (NSE), Currency (FOREX, MCX SX) markets.