Fundamental vs Technical Analysis: Which One Works Best?

There are two main ways traders and investors analyze markets — technical and fundamental. That “fundamental analysis vs technical analysis” debate is still going on in some places. The first focuses on price charts, indicators, and patterns to forecast future movements, while the second studies economic data, interest rates, and news to understand what drives those movements.

However, this discussion is mostly for newer traders who fail to realize one simple thing when they are learning to trade Forex: these two types of analysis are two slightly different aspects of the same thing – financial analysis. Note that we used the word “slightly”.

This article explains how these two methods differ, where each works best, and how to combine them effectively. You’ll also see how Forex Tester Online can serve as a practical tool for testing and improving your technical analysis strategies before risking real capital.

What Is Fundamental Analysis?

Some people think that this style of analysis is the opposite of the technical analysis. One of the core differences in these two styles is that enthusiasts of fundamental analysis rely on the strong established brands, companies, economies to base their judgement on something that people will go long on.

During the economy recession, investors tend to go short on various weaker stock market trying to cut the potential losses.

This is the main destination point for the fundamental analysis that tries to estimate how the market will react to the specific events and changes related to economic indicators on the macroeconomic level.

Even the slightest change in the local regulations, industry standards, and new groundbreaking products can significantly change the situation in the market forcing investors to reshuffle their portfolios and moving prices in certain directions.

It does not mean that this intrinsic type of analysis does not rely on numbers and tries to make predictions based on the news and gossips only.

There are hundreds of tools that can be used to make estimations and evaluate possible changes in the market. Describing all of them is simply impossible.

Let’s take an example: an investor wants to decide whether to buy specific stocks (in Forex trading, we usually work with the CFD contracts).

There are several important factors that this investor should consider.

Here they are:

• The current price and trend of the asset (bearish or bullish).
• Previous similar events that affected the asset and to which degree.
• Related macroeconomic factors that can be of interest.
• Possible implications of the news that is expected to affect the asset.

This is obviously not the fullest list of the factors that should be taken into consideration. There are additional methods that can help you to design a better analytical pattern.

What is Technical Analysis?

The problem with the trueness of results is one of the core issues in any kind of analytical process. In fundamental analysis, the number of variables that must be included is enormous — from macroeconomic indicators and market correlations to political and social shifts. This often makes the results diluted and hard to interpret because the inputs constantly change. As a result, fundamental analysis can become too complex for short-term decision-making.

Technical analysis, on the other hand, takes a different route. It focuses purely on price action and market psychology reflected in charts. Instead of analyzing the causes, it studies the effects — price movements. The method relies on technical instruments.

These instruments are called indicators (you may know them as Forex tools) and can be applied to any price graph.

Here is an incomplete list of indicators:

• Moving Average. This is a tool that allows you to assess the mean price of the asset over the course of a specific time period which is a good way to understand the nature of the current trend.
• Alligator. This is basically a set of moving averages that will help you to understand the relative strength of a trend on the shorter timeframes against the strength of the long-lasting trends.
• Relative Strength Index. This is a great tool to understand the momentum of the trends and their changes within a certain timeframe.
• MACD is based on two MAs. This tool helps you to understand how the market really works in the long run.

Please, note: in our blog there are numerous articles about indicators including their settings, strategies and trading set ups. Read the detailed article about Awesome Oscillator, for example, or the Alligator Indicator, as well as many others.

There are more factors that must be included in the fundamental analysis if we want to make closer estimations. Here are some more variables:

• The relation of the mean price of the market to other macroeconomic parameters.
• The correlation of the mean prices of the assets that are similar to the asset in question.
• Quantitative effects of the certain political and social changes on the asset.
• Upper and lower limits for the price movement.

Again, this is not the fullest list of fundamental analysis variables that affect any asset. The problem is that the result becomes diluted because of many constantly changing parameters that do not give you a good understanding of what is currently going on.

The comparative analysis becomes too complicated and makes you put in the titanic efforts to make a good assessment of the current situation.

Its core belief is simple: history tends to repeat itself, and price movements often follow recognizable patterns. This makes technical analysis especially useful for short-term trading, where quick, data-driven decisions matter most. It adapts easily to volatile markets — like Forex, crypto, and meme stocks markets — and allows traders to act without waiting for new economic data.

Also read: TOP-21 Technical Indicators for traders

Technical vs Fundamental Analysis Differences

In the financial markets, every trader and investor relies on some form of analysis to make informed decisions. The two dominant schools of thought — Fundamental Analysis and Technical Analysis — approach the market from opposite directions. Fundamental Analysis studies the underlying economic and financial factors that determine the intrinsic value of an asset, while Technical Analysis focuses on price patterns, volume, and chart behavior to predict future movements.

Understanding how these two methods differ helps clarify which one fits your trading or investment goals, and how you can combine them with tools like Forex Tester Online to strengthen your risk management and test real strategies.

In essence, Fundamental Analysis tells you what to buy or sell, while Technical Analysis shows you when to act. Many professionals combine both: they use fundamentals to filter strong assets and technicals to find precise entry and exit points.

Modern platforms like Forex Tester Online let traders practice and backtest their technical analysis methods — including Moving Averages, support and resistance, and price patterns — across real historical data. This practical testing bridges theory and execution, helping traders refine their risk management and trading discipline before facing live financial markets.

Applying Various Techniques of TA

You should always start from a broader general analysis. Usually simple moving averages are used to determine the trend. Then, RSI is used to determine the strength of a trend. After that, people use other momentum indicators to assess the situation.

All traders have their unique settings and indicator sets that help them to understand the market better.

The real purpose of the indicators is to give you a good visual representation of the market and its trends. Visualization is incredibly important for the successful Forex trading.

Here how you can use various techniques in an order:

• Search for patterns and identify when they start forming in the real time.
• Apply trend indicators to identify the general trend.
• Use momentum indicators to confirm the movement.

Using Both Types of Analysis

Fundamental and technical analysis don’t have to be viewed as opposites — the most effective traders often combine them into a hybrid strategy. In this approach, fundamentals define what to trade, and technicals determine when to act.

You can use them this way:

• Use extensive fundamental analysis to assess a market situation and make general predictions.
• Use technical analysis to either confirm your estimations or get a second opinion.
• With various TA techniques, identify possible quantitative changes (i.e. how much the price can move).

Start with Fundamental Analysis to identify strong assets — companies with solid earnings, stable balance sheets, and growth potential. This helps filter out weak opportunities and focus on high-quality stocks or currencies supported by real economic strength.

Then apply Technical Analysis to fine-tune your entries and exits. Use tools like Moving Averages, support and resistance, or momentum indicators (RSI, MACD) to spot favorable price zones and confirm timing. For instance, if you expect a stock to rise after a product launch, technicals help estimate the best moment to enter and set take-profit or stop-loss levels.

Today, AI-driven tools and real-time market data make this hybrid approach even more effective. Algorithms can scan thousands of assets, analyze price behavior, detect chart patterns, and integrate fundamental metrics instantly. Platforms like Forex Tester Online allow traders to backtest and refine these combined strategies — merging human judgment with algorithmic precision for smarter, data-based decisions.

Which Analysis Works Best?

It depends on three things: risk tolerance, investment horizon, and market conditions.

• Low risk + long horizon → lean Fundamental Analysis: earnings quality, balance sheet strength, cash flows.

• Higher risk + short horizon → emphasize Technical Analysis: trend, momentum, support/resistance.

• Market regime matters: in clear trends/volatility, technicals shine; around regime shifts (rates, earnings, policy), fundamentals lead.

But, as we said before, they are not the opposite. These two types can work together.

Improve Technical Analysis of Your Trading Strategies via Backtesting

Forex Tester Online lets you combine both analysis styles in one setup. Its integrated news calendar allows you to test reactions to rate changes, CPI, NFP, or earnings events, tag trades by event type, and compare results before and after major announcements.

For technical analysis, it provides a wide range of indicators like Moving Averages, RSI, MACD, and Bollinger Bands, plus tools for support/resistance and trendlines. The Blind Mode hides future bars for realistic testing, while Jump-to-Signal and multi-chart layouts make it easy to spot and refine your trading setups.

Why backtest here

✅ 20+ years of tick data across Forex, crypto, indices, stocks, ETFs, and commodities.
✅ Manual or automated runs; AI analytics and automations on Pro plans.
✅ Detailed stats: win rate, payoff, drawdown, MAE/MFE, equity curve, latency logs.
✅ Build and verify risk management: stops, targets, position sizing.

Conclusion

Technical and fundamental analysis serve different roles but work best together. Fundamentals help you choose what to trade; technicals help you decide when to act.

Define your goals, risk, and horizon. Blend both methods to fit your plan, then prove the rules. Backtest your ideas in Forex Tester Online before putting real money at risk.

FAQ

Which platform is best for trading technical analysis?

We recommend Forex Tester Online as an advanced backtesting tool.

You can also use AmiBroker as a tool for traders who need advanced charting, market analysis, and customizable backtesting tools. 

Which analysis is best for beginners in trading?

Technical is usually the best starting point because it’s easier to learn and apply. Price charts, indicators, and simple support and resistance levels help beginners understand market behavior quickly. However, to grow as a trader, you’ll eventually need to study fundamental analysis too — it explains why markets move and helps you make stronger long-term decisions.

To which assets can technical analysis be applied?

Technical works across almost all financial markets, including Forex, commodities, stocks, and crypto. Since price patterns and market psychology repeat everywhere, the same tools — such as Moving Averages, RSI, and MACD — can be used to backtest and trade any of these asset classes in Forex Tester Online.