How does TA differ from fundamental analysis in identifying and responding to economic shocks?

Technical analysis looks at price charts and patterns to predict short-term market moves, focusing on trader sentiment. Fundamental analysis considers a company's financial health and economic factors for a long-term investment view. In response to economic shocks, technical analysis adapts quickly to market sentiment, while fundamental analysis takes a longer-term perspective, reassessing a company's intrinsic value.

Technical Analysis (TA) can be described as method of market analysis that involve just the visual representation of price data in form of a bar chart, candlesticks or line chart. The representation of this data is historic and that helps technical analysts to backtest (go back in date to optimize) price reaction and gain insights in market behavior. Technical analysis is broadened into two parts; price action and indicators (RSI, MACD, MA, Bollinger bands, Stochastic, OBV, fractals etc) The sole aim of TA is to finetune the best trading opportunities using the chart data. All you can see on your chart excluding external factors.

To increase the effectiveness of technical analysis, it is essential to take into account expected economic and political variables that may not be present in historical data. While technical analysis primarily relies on studying historical patterns and technical indicators, understanding the economic and political context can be crucial. Some factors that may impact markets and are not always available in historical data include: Major Economic Events,Political Events,Breaking News,Currency Volatility When analyzing charts and using technical indicators, it's important to integrate these updated economic and political factors into your considerations. Technical analysis alone may not provide a complete picture

I always say FUNDAMENTAL(News) is The KING & TECHNICAL(numbers on chart) is Secondary. TA is very good if you can do it properly. Whether it's Equities, FX or, Commodities whichever I trade, I always follow Fundamental(News) 1st. Technical Analyses with back testing doesn't work for me. I look forward to the next second. I use only few Technical indicators, oscillators using Maths, Statistics & when all of these gives me the same signals then, I execute orders. With both together, I even made & hopefully can make 100%+ profits within a day & only 4, 5 days in a month. I don't invest much. Of course I take the HITS also. Sometimes, I intentionally make loss to make more profits. I've created my own Strategies after trading 25+ years.

As I know, TA is a way to learn how trends responded to macro and micro economic events and uses historical data to forecast how they affect on financial markets.As trends are the main part of TA a Technical Analyst can use it to gain and save profit by observing the trends in the time.So however it’s good to predict and identifying some shocks in short time but it is not useful to responding them in the mid time or long time investing strategies.On the contrary, fundamental analysis uses different methods to determine the value in the markets uses financial factors which their effects will be shown on the trends not very soon. As a result, TA is suitable for short time strategies and FA is good to be used in long time investing strategies.

TA generally works best in trending and liquid markets, such as FX in the early 2000s. Breakout methods such as the Turtle Trading System - devised by Richard Dennis and Bill Eckhardt in the 1980s - worked exceptionally well. For stocks, a more appropriate strategy might be William O'Neill's CANSLIM technique. This uses breakouts from common chart patterns and is particularly effective after market lows such as the Financial Crisis of 2008. However, some elements of CANSLIM use FA - so it is not a pure TA play. TA includes several popular pullback set-ups, too, such as when price hits a moving average or support/resistance zone. This is often combined with reversal candlestick patterns (suggesting the near-term move is likely complete).

Technical Analysis (TA) is a method of evaluating financial markets by analyzing historical price and volume data. It relies on chart patterns, technical indicators, and statistical measures to forecast future price movements. TA assumes that historical price patterns tend to repeat, allowing traders to identify trends and make informed decisions. Key tools include Moving Averages, Relative Strength Index (RSI), and support/resistance levels. TA is often used for short to medium-term trading strategies and aims to help traders anticipate market trends and potential turning points based on past market behavior.

Through FA, one gets to have a benefit of longer time approach and sit out the secondary corrections while riding the primary correction and gains through a lot of buying and selling power. Meanwhile TA allows you to get the same kind of returns in lesser period of time understanding the buying and selling power points and looking at profits in terms of risk/return ratio. Where you could buy say 1000 quantities at a specific price, by balancing your risk effectively, you could buy more quantity at the same price. TA allows you to understand the technicality although there is none for psycho affect of market but that psychological effect happens in a numerical cycle which creates the technicality. TA simply helps you gaining in small run.

TA focuses on historical price movements, patterns, and indicators, aiming to predict future price movements based solely on market data. During economic shocks, TA primarily observes immediate market reactions and price trends without considering the underlying economic factors. In contrast, fundamental analysis delves into economic, financial, and qualitative factors like GDP, interest rates, company earnings, etc., to evaluate the intrinsic value of assets.

Technical analysis, Focuses on analyzing price and volume data of a security to identify patterns and trends that might signal a potential economic shock. It uses historical data and various indicators to predict future price movements. For example, a sudden increase in volatility or a break below a key support level could indicate an impending economic shock

Fundamental analysis is a method of analyzing the market where economy terms, approach and interpretation are brought into usable and actionable perspective. You have heard about GDP, how does that affect the asset class and currencies of different countries? How to trade the impact of central bank monetary policy. How to interpret macro-economic and micro-economic impacts in the world and how the influence the market. What

FA involves evaluating companies by analysing their financial statements to identify high-quality businesses. The goal is to purchase stocks at a price below their perceived market value. This process varies based on factors such as industry and company age. For mature companies, metrics like FCF or ROIC are useful, while for newer firms, sales growth or operating margins may be more relevant. Methods such as DCF are commonly used, but they rely on individual assumptions about a company's future performance. Prominent investors like Warren Buffet and Peter Lynch use financial metrics. In addition they consider their personal assessment of factors like management quality, product appeal, and the industry's growth potential.

Fundamental Analysis is an approach to evaluating securities by examining the intrinsic value of an asset. It involves analyzing various factors, including financial statements, economic indicators, and industry trends, to determine the true worth of an investment. Key elements include revenue, earnings, expenses, and macroeconomic indicators. Investors using Fundamental Analysis aim to assess whether a security is overvalued or undervalued. This method is vital for long-term investment decisions as it provides insights into a company's financial health and growth potential. It contrasts with Technical Analysis, which relies on historical price data and market trends.

Fundamental analysis evaluates the intrinsic value of a security by analyzing its underlying financial health, industry trends, and economic factors. This includes analyzing factors like earnings reports, interest rates, and economic indicators to assess the impact of a potential shock on the company and the broader market

The purpose of fundamental analysis is to utilize microeconomic and macroeconomic information to estimate the likely market value of an asset at some specified point in time (present or future). In performing this assessment, it is assumed that the market value of a security (or group of securities) will tend to reflect the present discounted value of all future free cash flows that are estimated to be received by the holder of the security. Any information that can potentially impact the estimate of said cash flows and the timing of their payment is of utility to fundamental analysts.

TA can help identify economic shocks by different formation of patterns in market, momentum in a particular asset class, spike in the market such as the 2022 flash crash recognized in price action and unusual sustain of volume beyond usual limit just like in RSI ranging on 100 for consecutive 3 days. This can simply imply that something is hitting the volatility to pump or dump in the market.

TA shocks Short-term, stocks typically resolve quickly. Before the Covid crash, the S&P500 was already looking overextended. Notably, leading stocks like MSFT which made a lower high, indicated that savvy investors were taking profits. The 2020 crash began with 2 gaps down in quick succession - breaching previous support levels on higher volume. The high-to-low was reached in just 23 days - and the uptrend confirmed just 10 days later (higher closes on increased volume and a break above the previous pivot high). While most crashes and recoveries are gradual, allowing more time for strategic exits and entries, timing market extremes is challenging. However, using TA can help you protect most of your profits - and re-enter at a lower price.

A fact that we cannot just predict what's going to happen in future. Economic balance is something which gets affected through many global events. TA represents impact of global change in a certain economy by sharp changes in price. There might be a day rally either side. If news is bad like covid, it might reflect by crashing down sharply. TA assumes that this affect can already be discounted 3-4 days prior to crash day by showing signals to that. May be through gaps or volumes residing, pattern failing when there's strong market. TA helps in analyzing the trend in long term and that shows for signals. Maybe the trend is turning which proves the news always follow prices because prices get discounted earlier than breaking of news.

Most traders focus on how Technical Analysis tries to predict future trends or price movements by studying past price data which is good however more importantly experienced, professional traders and investors understand that with TA you react to price movements rather than trying to predict price movement. The key is being able to be adaptable to market changes and proactive to decisions that can change with a short term period

Technical Analysis (TA) identifies economic shocks by scrutinizing historical price and volume data. It observes price patterns, trend shifts, and volatility measures to gauge market sentiment. Candlestick patterns, like engulfing or doji, reveal shifts in investor sentiment. Momentum indicators such as RSI or MACD assess the strength of price movements, potentially signaling economic shocks. Unusual trading volumes, changes at support/resistance levels, and sentiment indicators like Put/Call ratios can indicate market reactions to unexpected events. TA combines these tools to recognize anomalies preceding or coinciding with economic shocks, aiding timely decision-making. However, it's important to use TA alongside other analyses for a comp

TA can help to identify economic shocks ex post facto or ex ante. In the former case, TA will help identify when and how information regarding the shock was priced into the market. In the latter case, TA can provide real-time signals of an impending shock. Indeed, due to the principle of reflexivity, market prices play a key role in economic shocks. Therefore, identification of a price shock in real-time through TA can assist in prediction of an economic shock.

Fudemenatal analysis can also give predictive signals for Economic Shocks, PMI indices, port, rail&road and air cargo activities, or policy shifts by governments and Central banks. This can be analyised on the borader perspective of fundemantal analysis. However there is an important issue, this signals are for the shrinking economy which is not a desired condition for policy makers, thus there will be always a reactivity to prevent a shock, whether monetary or fiscal support packages are always on the bag. So following all the news sources and analysis should be important to make a prediction of an Economic Shock due to fundamental analysis.

In a simple way fundamentals analysis looks at the long term view, how the market would react to shocks (such as pandemic, war, civil unrest in a country and so on) Learning how to use these shocks and uncertainties in the market are part of the skills one needs as an analyst or a trader because these shocks are unavoidable and can be used to increase investment opportunities. For example learning about safe heaven currencies and assets to invest in long term during war is a skill that gives one an edge using fundamental Analysis.

Fundamental analysis can help to identify an economic shock ex post factor or ex ante. In the former case, economic shocks are generally classified as such through statistical measures of key fundamental data. In the latter case, by identifying certain fundamental pre-cursors of economic shocks, fundamental analysis can assist in the prediction of such shocks..

The best way to respond to economic shock is to cut your losses if caught unaware, maximize your profit if direction of shock aligns with your bias. Set stop loss at a price of your risk appetite. Trial your profit as the case may be. Capital protection is the first thing to look forward to. Secure your fund and be vigilante in volatile market.

TA focuses on adapting to the new market conditions and following the signals generated by price action and technical indicators. It doesn't try to predict the exact cause or consequence of the shock but rather focuses on the current and expected behavior of market participants. Traders may use technical analysis to identify potential buying or selling opportunities based on the new market dynamics.

A technical analysts or trader focuses on reacting rather than predicting to the movement of a shock in the market. And one way to do this is to understand that each trader or analysts has a unique way he looks at the market and learns to be consistent with that approach as long as it is profitable in the long term. Your own trading plan, being consistent with your style of trading and entry critieria, your reasons for taking a trade has to be based on a systematic approach and logic rather than an emotional decision or based on hearsay but proper research.

TA does not respond to economic shocks. TA analyzes prices. TA is concerned with description and predicting of price movements. It is irrelevant whether or not the price movement is caused by an economic shock, or not. Having said that, there are certain price patterns that tend to be correlated with the periods leading up to, during and after economic shocks. Thus, knowledge of a shock can alert Technical Analysts regarding what sort of price patterns they should be expecting. In this case, the economic shock helps the technical analyst predict price patterns rather than price patterns helping the technical analyst predict an economic shock. The analytic relationship works both ways.

Fundamental Analysis focuses on assessing the long-term impact of the shock on the fundamental value of the security. This involves analyzing the company's ability to adapt and adjust its business model to the new economic environment. Investors may use fundamental analysis to determine whether to hold, sell, or buy additional shares based on their revised assessment of the company's long-term prospects.

Fundamental analysis of individual securities responds to an economic shock by updating forecasts of future cash flows and their timing. Fundamental analysis of macroeconomic phenomena responds to shocks by updating forecasts of microeconomic and macro economic variables that were impacted by the shock. Fundamental analysis requires a constant updating of prior assessments of all of the economic factors which impact a forecast. Because a shock is a major economic event, it will often cause significant changes to forecasts.

Economic shocks are not completely new most analysts. The only challenge many face is the unawareness and unpreparedness in their market expectation. Forgetting that a data release date can mean a thing and natural disaster can mean another which makes it more dynamic. Shocks come as form of breaking news, unseen and unexpected natural disaster like earthquake, terrorist attacks like bombing a location etc. These shocks need technical and fundamental shock-proof that must be built around them when they happen in the market.

For independent traders/investors, it's generally more advantageous to use a combination of TA and FA. The longer you can stay in a winning trade, the more likely you are to find success. TA can really help with timing the market - and FA can help you take a longer-term perspective to stay with the trades you want to be in. For example, if your FA values a stock at $100 (and the market is bearish) you might want to use TA to assess if you should buy at this price - or if there could be an opportunity to buy cheaper. Everyone has an opinion but their goals and targets may be different to yours - so having confidence in your analysis is essential to making independent decisions and sticking with them. Don’t overcomplicate it - keep it simple.

Technical analysis (TA) focuses on past and present price and volume data to identify trends, patterns, and support and resistance levels, assuming market efficiency. It aims to predict future price movements. In contrast, fundamental analysis (FA) examines the intrinsic value of a security by analyzing financial statements, industry conditions, and economic factors. FA practitioners believe prices will converge to intrinsic value over time. These differences result in distinct trading strategies in response to economic shocks, with TA being more short-term and focused on trading opportunities, while FA is more long-term and geared toward investment opportunities.

At the most basic level, fundamental analysts study how supply and demand impacts prices. Technical analysts study price action and make inferences about supply and demand. The two disciplines are complimentary. You can understand fundamental better by studying price action and you can understand price action better by studying fundamentals. The integration of both techniques enables a better analysis of the behavior of securities prices and the myriad factors that influence them.