Fundamental vs Technical Analysis

What moves the market, and how do traders make sense of it? In this clip, we break down the difference between fundamental and technical analysis, showing how one helps explain the story behind price movements, while the other helps traders read price behaviour in real time.

When people first start learning about trading, they quickly come across two main ways of analysing the market: fundamental analysis and technical analysis. 

Fundamental analysis looks at what gives an asset value in the real world. It asks questions like:

What’s happening in the economy? Is growth accelerating or slowing? Are interest rates rising or falling? Is inflation increasing or easing? Is a company growing its revenue and earnings? How strong is consumer demand? Is supply tightening or expanding in commodities like oil or gold? 

In other words, fundamental analysis looks at the economic and financial forces that influence prices over time.

Technical analysis looks at the market from a different angle. Instead of focusing on the real-world drivers, it studies charts using tools such as price action, trends, patterns, indicators, and key support and resistance levels.

It is less focused on why something should move, and more focused on how price is behaving and when a move may be happening. 

Fundamental analysis asks: Why should the price move?

Technical analysis asks: When is the move likely to happen? 

The simplest way to compare them is this: Fundamentals focus on value and logic. Technicals focus on price and timing. A useful analogy is to think of fundamentals as the diagnosis and technicals as the heart monitor. 

The diagnosis helps explain what’s happening underneath. The heart monitor helps you track what’s happening in real time. That’s why the best traders use both together. 

They use fundamental analysis to understand the bigger story, what’s driving the market and whether an asset looks overpriced or undervalued. Then they use technical analysis to help with timing, identifying trends, momentum, key price levels, and potential entry or exit points. 

So it’s not really a case of one being better than the other. The two approaches complement each other, each offering a different way of understanding the market. Fundamentals help you understand the move. Technicals help you navigate it.