Trading and Analysis
"Technical and fundamental signals often conflict with each other. There are times when the charts signal one direction and fundamentals scream another. An investor with knowledge of both can effectively enhance a portfolio by understanding commodity fundamentals and by using technical signals to get into or out of investment positions.”
- Andy Hecht, How to Make Money with Commodities
You have created your trading plan and thought through a money management strategy that works best for you. Now it’s time to define how you plan to make buy and sell decisions.
- What type of trader you are going to be?
- What type of tools or analysis will help you achieve your personal goals?
Some traders and investors like to look at price patterns on a chart and technical indicators to make a decision, i.e., technical analysis. Some prefer to back up their decisions with news and data, i.e., fundamental analysis. Still others combine these two techniques.
Many traders attempt to combine technical and fundamental analysis to derive a benefit from both approaches, each with their own virtues and drawbacks. Whether you choose to employ fundamentals, technicals or both to help predict the future, always remember that the current market price is always the right price. The market always knows best because the latest price is the one at which current sellers and current buyers are meeting in a fair and transparent marketplace.
In this section, you’ll explore the differences between fundamental analysis and technical analysis. Then, you’ll learn an important concept that traders need to understand—the difference between trending and anti-trending markets.
Did you know that CME Institute classes can fulfill CFA and GARP continuing education requirements? Every CME Institute course can be self-reported in your CFA online CE tracker and select classes can be used for GARP credits. See which of our classes qualify for GARP credits here.