Fundamental & Technical Analysis - Which Market Analysis is Best for Swing Trading?

Technical analysis and market analysis are the two main methods of market analysis.  There has and probably always been debate over which one is better, so let's take a look at them briefly to see if either of these two are best suited for swing trading or trading in general.

Fundamental analysis is basically the concept that if a countries economy is strong; its currency will in theory be strong.  Investors, businesses, banks and governments gain faith in a currency if the economy for that currency is performing well (such as increased interest rates etc).  This then implies that the currency should strengthen and be the stronger currency in the currency pair.  If the economy suffers a down turn, the opposite is believed to happen.  The currency will weaken and the other currency in the currency pair should strengthen.

Technical analysis is the study of price movement.  Basically this means studying charts.  The most important thing to be learned from technical analysis is the importance of the trend.  A lot more goes into technical analysis than just this.  There are many different trading indicators and chart patterns that also fall into this category.  We will get into this a little later.

Which one is better?  Neither.  Fundamental analysis is important because you should be aware of upcoming news and any other major events that could have a big impact on the markets.  Do you really want to open a trade 2 minutes before US interest rate details are released?  Technical analysis is important because the trend is your friend and when swing trading you want to be trading with the trend and not against it (at least until you master your skills of trading and are aware of the risks and rewards involved in counter trend trading).

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