How to coordinate technical analysis with fundamental analysis?

Although technical analysis and fundamental analysis are often at odds, there are aspects that can work together to the mutual benefit of traders when investing in the stock market. Market analysis can be approached from both points of view to get more out of your trading.

I believe that, in the stock market, the factors encompassed by technical analysis come before the known fundamentals, but I also believe that any major market and/or price movement must be rooted in underlying fundamental analysis factors. Therefore, it simply makes sense for a third to be aware of the fundamental condition of a market when investing. At a minimum, technical analysis can ascertain from its opposite fundamental analysis what would fundamentally have to happen to justify a significant market and/or price movement that would be reflected on a price chart. In addition, seeing how the market (Forex, futures or stocks) reacts to fundamental news can be an excellent technical indication.

The fundamental analyst or fundamentalist trader can use technical factors to confirm an analysis or to alert to something important that may be happening. The fundamentalist trader may consult a price chart or use a computerized trend-following system as a filter to avoid taking a position opposite the current trend. An unusual movement on the price chart can act as a warning to a trader performing fundamental analysis and cause him to examine the fundamental situation in more detail.

During the many years that I have been a trader doing technical analysis and trading in various markets (Forex, futures or stocks), I have encountered many discussions with traders doing fundamental analysis commenting on some market movement that seemed imminent on the price charts. Answers like “that can never happen” or “no way” were frequent, as it was also frequent that the trader who had given me that answer would find himself a couple of weeks later looking like a madman for reasons or fundamental news to explain a sudden or “unexpected” market and/or price movement.

In my opinion, in trading it is obvious that there is room for much more coordination and cooperation in these types of analysis (technical and fundamental) when investing in the stock market and to better adjust the entry price when making an investment in the financial markets.

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