There is NO RIGHT or WRONG, its as pointless as the Nikon & Canon argument. Somewhere between the three is a GREY area that is the truth. The Markets are HUMAN NATURE and there is nothing and nobody, that can 100% predict human nature. If it was that easy we would all be rich.
It’s a FACT that the fundamental news moves the markets, this is undeniable. Data released at certain times on certain days will influence the way that traders invest. In fact it is quite obvious when there is very little movement in the markets before big news releases, or the markets are “ranging” in a tight range before a major announcement. It is also interesting to watch an announcement released and then watch the market reaction. There are hundreds of fundamental news items that can influence the markets, check the “Trading Fundamental News Releases” section for more information.
Technical traders believe that “ALL” market predictions can be made, by looking at the charts and working on the assumption that “HISTORY REPEATS ITSELF” by using the analytic tools they believe that they can predict the next market movement without considering the “fundamentals”.
The issue with this theory at this time, is that since the ongoing “Crisis” of 2008, we actually haven’t been in this situation previously.
The field of technical analysis is based on three assumptions:
1. The market discounts everything.
2. Price moves in trends.
3. History “tends” to repeat itself.
1. The Market Discounts Everything
A major criticism of technical analysis is that it only considers price movement, ignoring the fundamental factors of the currency. However, technical analysis assumes that, at any given time, a currency price reflects everything that has or could affect the currency – including fundamental factors. Technical analysts believe that the currency fundamentals, along with broader economic factors and market psychology, are all priced into the currency price, hence removing the need to actually consider these factors separately. This only leaves the analysis of price movement, which technical theory views as a product of the supply and demand for a particular currency in the market.
2. Price Moves in Trends
In technical analysis, price movements are believed to follow trends. This means that after a trend has been established, the future price movement is more likely to be in the same direction as the trend than to be against it. Most technical trading strategies are based on this assumption.
3. History Tends To Repeat Itself
Mainly in terms of price movement. The repetitive nature of price movements is attributed to market psychology or, market participants tend to provide a consistent reaction to similar market situations over time. Technical analysis uses chart patterns to analyze market movements and understand trends. Although many of these charts have been used for decades, they are still believed to be relevant because they illustrate patterns in price movements that often are repeated. There are also many technical tools that can assist you interoperate the markets movement, check the “education” section for more information.
Market sentiment is the general prevailing attitude of investors as to anticipated price development in a markets. This attitude is the accumulation of a variety of fundamental and technical factors, including price history, economic reports, seasonal factors, and national and world events.
For example, if investors expect upward price movement in the markets, the sentiment is said to be bullish. On the contrary, if the market sentiment is bearish, most investors expect downward price movement. Market sentiment is usually considered as a contrarian indicator.
Market sentiment is monitored with a variety of technical and statistical methods such as the number of advancing versus declining stocks and new highs versus new lows comparisons. A large share of overall movement of an individual stock has been attributed to market sentiment.The stock market’s demonstration of the situation is often described as all boats float or sink with the tide, in the popular Wall Street phrase “the trend is your friend”.
Market sentiment, as such, might be acquired from more than one sentiment analytical tool. For example there could be just simple extraction of movement on stock exchange and validly called market sentiment. Another tool is to extract the news and media information based on their polarity. Yet another sub-subject might be community sentiment about the market movements (blogs, forums).
In the last decade, investors are also known to measure market sentiment through the use of news analytics, which include sentiment analysis on textual stories about companies and sectors.