Does it have to be a choice?

Okay since posting over the last two weeks on the main types of analysis (that you can see here: http://illuminatingfinance.blogspot.com.au/2014/05/fundamental-trading.html, and here: http://illuminatingfinance.blogspot.com.au/2014/05/technical-analysis.html), I need to clear up a question I have received a from a few concerned readers.

"I now understand the difference between technical and fundamental analysis, but I'm not sure which one to choose. Could you help?"

Okay let me start by saying, it doesn't have to be a choice. There are a many traders and investors who are extremely successful who use both fundamental and technical analysis. They design their trading system around the complementing elements each type of analysis provides. An example of this could be using technical analysis to indicate possible buy movements and then using fundamental analysis to decide whether to pull the trigger.

Now before the next question is asked, no you don't have to use a combination of both types of analysis. As a trader or investor you have to decide how you want to design your system. You may have more of a focus on one type of analysis, an equal mix, or even completely reliant on style. It is up to you!

Good luck!

Make sure you to let me know if anything I've said has helped you! Just email illuminatingfinance@gmail.com

Technical Analysis

Following from last week's post on Fundamental analysis (that you can see here: http://illuminatingfinance.blogspot.com.au/2014/05/fundamental-trading.html), I thought this week I would explain to the other type of analysis referred to as technical analysis.

Technical analysis uses an examination of historical data to form predictions for future price action. These are most commonly an analysis of price and volume. Traders who utilize technical analysis to make trading decisions often run very systematic trading strategies. This reduces emotional involvement to almost zero, instead using quantitative data to indicate when to enter or exit the market. The graph below shows a trend which a technical trader may have picked up using his system.