Q. Are Fundamentals better or technical’s? by Jamie Coleman

QAQ. In my time trying to understand the thinking of the retail trader, I have come to realize that the majority of them rely on technical analysis to base their trades off of. On the other hand, when I study successful traders they might use technical analysis, but also have a general bias in regard to their fundamental view of the situation. When Stanley Druckenmiller broke the BoE he correctly anticipated the BoE would not defend the pound. So, would a retail trader be better served to try to understand the fundamentals or at least pay attention to how the market fades a piece of important news instead of all the technical systems being peddled today?

A. My views on this topic are very simple:

  1. Understand the basics of technical analysis. You don’t need to be a quant-geek to be successful, but understanding the first ten chapters or so of the classic Technical Analysis of the Futures Markets: A Comprehensive Guide to Trading Methods and Applications by John J. Murphy would be a great start.
  2. Understand the basics of fundamental analysis. Pay attention to trends in interest rates, commodity prices, prevailing direction of investment flows, among other. When the fundamental and technical outlooks for a currency differ, always side with the techs.
  3. When the fundamental and technical outlooks for a currency converge, go for it! Take a more aggressive position than normal.

Source: Jamie Coleman

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