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Why You Should Ignore Fundamental Analysis When Trading?

Tue Mar 23 2021 18:02
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There are different opinions about fundamental analysis in the global market. From retail traders to institutional investors, there are different recommendations. Sometimes expert traders recommend beginners ignore fundamental analysis when trading. But beginners become confused about it because they don't know why they should ignore fundamental analysis. 

From the stock market to the forex market, there are millions of traders using fundamental analysis. But still, there are many reasons why you should stop using fundamental analysis.  

Ignore Fundamental Analysis - Top Reasons 

Don't worry if you are confused about using fundamental analysis. Because here we will let you know why fundamental analysis is not useful for you. Maybe it is working fine for some of the traders out there. But it doesn't mean that fundamental analysis will work fine for all of the traders. You must have to know why fundamental analysis is not useful anymore. 

So here we are with this useful post to help you know more about fundamental analysis. 

Reasons Why You Should Ignore Fundamental Analysis 

There are many reasons why you should ignore using fundamental analysis. Maybe there are many reasons why you should use it. But you must have to go through these reasons also. We are not just going to talk about the cons of fundamental analysis. Fundamental analysis has cons in a similar way technical analysis has. But some other strong reasons make fundamental analysis a useless trading technique. 

There are many other trading techniques and trading strategies that you can use. A trader who trades with technical analysis can also make a profit as compared to a fundamental analysis user. 

#1. Too Many Myths 

The first reason that makes fundamental analysis a less profitable trading style is too many myths about it. Many myths make it useless in various markets with high volatility and liquidity. However, if you learn how to trade profitably, then you can use fundamental analysis. But you have to save yourself from following myths.  

Easy To Follow Method 

Trading for beginners is not easy. But some beginners believe in a myth which states that fundamental analysis is easy to follow method. So you just have to keep in mind that it is not a quick-rich scheme. 

High Success Rate 

Most beginner traders believe that fundamental analysis has more success rate as compared to other trading systems. Don't think that this trading system will work for you if it has a high success rate. 

Useful For Beginners 

It can be easy for beginners, but it is not providing surety about profits. You will need a stop loss feature to manage the risk here also. Don't think that it is easy to read chart patterns in fundamental analysis. 

No matter if you belong to forex trading or stock trading, you need the same knowledge for fundamental analysis. 

#2. High Chances of Manipulation 

The biggest doubtful thing about fundamental analysis is manipulation. There are different manipulations identified in the past related to fundamental analysis. Retail traders have less control and they get trapped in this manipulation. 

Retail traders are limited to buy or sell actions while trading stocks or trading currencies being forex trader. Following are some manipulation issues you need to consider before going to invest in any trading market. 

Institutional Investors Conspiracy 

Institutional investors influence the market in the wrong way. Many conspiracies are revealed in the past related to different trading markets. 

Data Manipulation By Companies 

Companies that list their stocks in different financial markets manipulate the data to attract more retail traders. 

Manipulation By Market News Publishers 

Market news publishers are also considered important in online trading. But many publishers provide wrong trading tips, investment advice, and market commentary. Trend trading can be harmful because there are manipulations behind trends. There are more chances to lose money for retail investors. 

#3. Lack of Transparency 

There is no transparency when you are using data in fundamental analysis. If we compare the transparency level of fundamental analysis with technical analysis, then we will see technical analysis winning. 

No matter if trading platforms have all the transparent information related to market sentiment (bearish or bullish) or asset fundamentals. Still, there is doubt, and it becomes more crucial when you trade stocks. 

Inauthentic Data Sources 

Sometimes retail investors or beginners who are trying to learn to trade are provided inauthentic data sources. These sources impact the result of fundamental analysis. 

Non-reliable News Sources 

We use too many news sources while conducting the fundamental analysis. These news sources include non-reliable news sources also. 

Biased Publications/Recommendations 

Many companies, expert traders and even masters of the trade are providing biased publications and recommendations. It can also impact your fundamental analysis results. 

Changes In Policies 

Sudden changes in the policies of companies without disclosing publicly can be an obstacle in your way to make money. No matter if you are using the best trading strategy, you will face this issue. Mostly stock traders face these issues. 

#4. Takes More Time 

You should stop using fundamental analysis because it takes more time as compared to its counterparts. Market trading requires quick decisions sometimes, but if you are using a trading method that includes fundamental analysis, then you cannot make quick decisions. 

Fundamental analysis is suitable for long term trading style. No matter what is the market sentiment, whether it is downtrend or uptrend, the fundamental analysis takes time. 

Only For Patient Traders 

If you are not a patient trader, then you cannot wait long. That is why fundamental analysis is not recommended for impatient traders. 

Availability Of Quick Alternatives 

There are many alternatives to fundamental analysis. These alternatives can provide you with quick results. Availability of these quick alternatives will encourage you to use them rather than using fundamental analysis, which is a slow-going process. 

#5. Not Useful For Short Term Trading 

You can make money trading with any trading strategy. It depends upon your skills and knowledge. But choosing the wrong strategy can also stop you from trading profitably. So to become a successful trader you need the right analysis strategy. 

If you are an intraday trader, then fundamental analysis is not good for you. Technical analysis is preferred more for day-trading.  

#6. No Importance Given To Trading Psychology 

There is no importance given to trading psychology when you are using fundamental analysis. That is why fundamental analysis seems useless sometimes. Because market psychology and trading psychology plays a significant role in any exchange market. 

There are many ways you can customize your fundamental analysis to add market psychology, but by default, it is not including this important factor.  

Summary -Reasons to Ignore Fundamental Analysis

Fundamental analysis is not useless, but if it is not useful for you, then you can stop using it. It is not going to work for all the traders out there. For some traders, it is useful and beneficial. But it doesn't mean that everyone must have to use it for profitable trading. 

Before making a decision you must have to pay attention to these six reasons why you should ignore fundamental analysis. 

Fundamental analysis is not suitable for short term trading. Also, impatient traders cannot utilize it because it consumes more time to show results.  
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