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Do You Want Problems? Trade Using Fundamental Analysis!

Tue Mar 23 2021 18:24
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A trader who trades stocks or currency pairs with fundamental analysis cannot trade conveniently. Some reasons make fundamental analysis a more difficult way to analyze financial instruments or even trading markets. If you are willing to start stock trading or forex trading with fundamental analysis, then this post is for you. 

Must read this post before you develop a trading strategy based on fundamental analysis. Many trading strategies succeed with fundamental analysis. But still, there are many issues that you will face as a stock trader or a forex trader who uses fundamental analysis.  

Problems with Fundamental Analysis 

Reading the title of this post that fundamental analysis can bring problems to your trading portfolio and make you lose money. You may think that fundamental analysis is just a useless trading technique. However, it is not completely true, because there are many other forex traders or stock traders who build successful trading techniques with fundamental analysis. 

Still, it is important to know how fundamental analysis can lead you towards less profitable trading. So let's get started with this post which talks about 

Problems That Fundamental Analysis Creates 

There are many traders to tell you that fundamental analysis is better than technical analysis. But still, there are many problems that fundamental analysis creates for you as a trader. So if you are going to start trading with the help of fundamental analysis, then you must read this post. 

Here we are going to tell you that fundamental analysis is not the perfect trading technique. It also has some disadvantages and you need to know them. However, you can learn how to trade using fundamental analysis. From the forex market to the stock market, every trading platform will have such problems with fundamental analysis.  

#1. Time-Consuming 

In this arena of market trading with high volatility and liquidity, you need more quick processes. There are quick changes in market trading in online trading platforms. Which makes it important to make quick decisions. But when we use fundamental analysis, then it takes a lot of time. It is a time-consuming process and not suitable for impatient traders.  

#2. Manipulated Market Data 

Data manipulation is always there in stock markets. Fundamental analysis is used more by stock traders as compared to currency traders or cryptocurrency traders. That is why there is a huge risk of data manipulation in the stock market due to fundamental analysis. So if you are a stock-trader who is willing to use fundamental analysis, then you might face this issue. 

Trading forex with fundamental analysis can be beneficial. No matter how good you are at using technical indicators and for how many trading courses you have enrolled in. You cannot avoid data manipulation while using fundamental analysis.  

#3. Less Control As A Retail Trader 

No matter how much hi-tech trading software you are using for fundamental analysis, you won't get much control as a retail trader. There are different types of traders in all the markets during live trading. There are institutional traders, companies, banks, fund managers, and retail traders. 

Retail investors or traders have the least control in a trading system where fundamental analysis is being used. From the currency-market to the stock exchange, you will see the same influence in every market. 

#4. Alterations 

Value investing is important in any exchange market. If you take a trading course then you will be taught there to choose stocks or assets with high values. But what if there are fake values created in the market — This problem of fundamental analysis is related to data manipulation. 

Market influencers and trading experts or companies create fake values with the help of many chart patterns, market news, and other resources. Beginners get trapped in such trading systems and lose money. 

#5. Issues With Short Term 

As a long-term trader, you will find fundamental analysis a good option. But as a short-term trader, you cannot get any benefits from it. However, some expert traders think that it is just a myth. They believe that you can use fundamental analysis even for short-term trading as well as long-term trading. 

However, most of the intraday traders ignore fundamental analysis. In intraday trading methods like technical analysis are preferred more. However you can use it for swing trading, but as an intraday trader, you are never recommended to use fundamental analysis. 

#6. Too Many Assumptions 

Most fundamental trading sources are not reliable. Sometimes there are too many assumptions about a trading market and financial instruments. All these assumptions and predictions are considered seriously in fundamental analysis. 

And the worst thing is that including more assumptions in the analysis make the results inaccurate. Too many assumptions impact the accuracy of the results of the analysis.  

#7. Incorrect Signals Due To Errors 

As there are data manipulation and fake values created in fundamental analysis, there are more chances of incorrect trading signals due to errors. There will be more chances of errors because the sources that provide you with information and data are not authentic. 

Most of the time this problem occurs when you are trading stocks. False trading tips or biased investment advice can impact a trading signal in fundamental analysis. Some market news publishers recommend you invest money in overrated assets. Such investments will never allow you to make money in the market. 

Who Can Use This Analysis? 

Now the question is if fundamental analysis creates so many problems then why are the majority of the traders using it? If they are using then whether they are getting profits in their hand or not? More importantly, is it good for you to use fundamental analysis for a financial-market? 

Here we will let you know whether technical trading is good for you or you should use fundamental analysis. In these days of advanced trading or algorithmic trading, you need to choose the right method for you. 

Long Term Vision Traders 

Long-term traders who are not willing to invest money based on short-term trend trading are recommended to use fundamental analysis. If you are a swing trader or a long-term trader, then you can use it.  

Experienced Traders 

Traders with no experience are not recommended to use fundamental analysis. However, if you are familiar with technical trading and technical analysis then you can use fundamental analysis.  

Traders With Influence 

If you are not a retail trader and you are a fund manager for an institution or something similar, then fundamental analysis is the best fit for you. Retail traders have less control in the markets due to fundamental analysis.  

Summary 

No matter if you are availing the best trading services from the best online broker. If you are not good at analyzing the markets and assets, then getting profit out of your trading account is not easier. 

Fundamental analysis and technical analysis are the two major methods used by traders. You can use fundamental analysis but you should know the major problems that it creates for you. These problems can be overcome by some tactics.  
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