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Forex: Common Criticisms of Technical Analysis

When we talk about the forex markets, one of the most hotly contested issues is whether or not technical analysis is a viable strategy when analyzing the forex markets.  Investors that have a more traditional outlook will sometimes reject the ideas that are espoused in price chart positioning.  Here, we will look at some of the criticisms that are generally discussed by these types of traders.

Fundamental Gaps


One criticism is the fact that most traditional investors focus on the fundamental analysis of the assets being traded -- and this is something that is often absent when traders base their positions on technical analysis. Technical analysts tend to counter this with the fact that fundamental analysis makes it more difficult to find specific entry points to buy and sell assets in the investment markets.


Unforeseen Volatility


In addition to this, there are often criticisms that forex technical analysis fails to alert traders to instances of extreme volatility.  The idea here is that traders will need to turn to the financial news developments in order to understand what is causing the volatility.  


If traders do not understand the cause of volatility , it can be difficult to know how long those extreme market moves are going to last.  If this a short-term situation, or is it something that is likely to change the market for an extended period of time?  These are critical questions that are often missed by technical analysis traders.


Combining Techniques


But this does not mean that one form of trading is any better or worse than the other.  

Fundamental analysts often use charting techniques in conjunction with a fundamental assessment of the strength of the underlying asset.  One of the best tools for conducting these charting techniques is meta trader, and you can download meta trader here using the offering made by FiboGroup.


The reality is that any form of analysis is only as good as its long-term results, and while there are some valid criticisms of technical analysis techniques the reality is that this is now an accepted form of market analysis that can be used in combination with some of the more traditional forms of trading.  


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