The foreign exchange market, or forex market, is the largest financial market in the world. It is a decentralized market where currencies are traded 24 hours a day, five days a week. Forex traders use various tools and strategies to analyze the market and make trading decisions. Two of the most popular approaches are fundamental analysis and technical analysis. In this article, we will explore the percentage of forex traders who use fundamentals vs technicals.
Fundamental analysis is the study of economic, financial, and other qualitative and quantitative factors to determine the intrinsic value of an asset. In the forex market, fundamental analysis focuses on economic indicators such as GDP, inflation, employment, and central bank policies. Traders who use fundamental analysis believe that these factors have a significant impact on the value of currencies.
Technical analysis, on the other hand, is the study of price patterns, trends, and indicators to identify trading opportunities. Technical traders use charts and other tools to analyze price movements and identify patterns that can indicate future price movements. Technical traders believe that all relevant information about an asset is reflected in its price and that price movements can be predicted by analyzing past patterns.
According to a survey conducted by DailyFX in 2020, 69% of forex traders use technical analysis, while 31% use fundamental analysis. This suggests that technical analysis is more popular among forex traders than fundamental analysis.
The popularity of technical analysis can be attributed to several factors. First, technical analysis is easier to understand and apply than fundamental analysis. Traders can use technical indicators and chart patterns to identify trading opportunities without having to delve into complex economic and financial data.
Second, technical analysis is more suited to short-term trading strategies, which are common in the forex market. Forex traders often trade on a daily or even hourly basis, and technical analysis provides the tools to identify short-term trends and patterns.
Third, technical analysis is widely available and accessible to traders. There are numerous software programs, charting tools, and online resources that provide technical analysis tools and information.
However, this does not mean that fundamental analysis is not important in the forex market. Economic and financial factors can have a significant impact on currency values over the long term, and traders who ignore these factors may miss out on profitable trading opportunities. Fundamental analysis can also provide valuable insights into market trends and help traders make informed trading decisions.
In fact, some traders combine both fundamental and technical analysis to get a more comprehensive view of the market. This approach, known as technical-fundamental analysis or “fundamental-technical analysis,” involves using both types of analysis to identify trading opportunities and make trading decisions.
In conclusion, while technical analysis is more popular among forex traders, both fundamental and technical analysis have their place in the forex market. Traders should consider their trading style, objectives, and preferences when choosing which approach to use. Ultimately, successful trading requires a deep understanding of the market, patience, discipline, and a willingness to adapt to changing market conditions.
