What really drives the market?


The opinions about the best approach in financial markets are constantly diverging. There are people who defends that technical analysis is the best way to be a successful trader and vice-versa.

However, and it’s a fun fact, is that the most people who believes that with only the technical approach (which is the easier method) that you can being successful at trading.

You can apply this method to Fx, commodities markets as well

So… if it is that simple why swing traders struggle so much about their swing positions? And they start to think that the market is always against them.

Have you ever wondered what really drives the market and which approach is the right one for you?

Whether it is fundamental analysis or technical analysis…

This might be one of biggest misunderstood in trading approach. Many people (most of them Retail Traders) defends that the technical analysis is what drives the market. Why are they saying that…?

It is quite simple to understand because it is way easier to teach technical analysis than fundamental ones — you can apply technical analysis in very different ways with basic setups and it might work, and even though you would be successful if you’re disciplined.

Let me give you the sad news… What really drives is the fundamental analysis and not the technical analysis!

The right approach is something like:

80% fundamentals

20% technical

However, if you use only the technical analysis you can be a profitable trader, but the approach must be smart, you cannot predict the market for a long time, only in a short time even though if you are using high time frames.

Fundamental approach > Technical approach

If you look at the great investors you should have already noticed that the majority of investors doesn’t talk about technical analysis, they are always looking for the economics, balance of payments, political issues, among other aspects.

Probably, the best approach is when you combine both analyses because the fundamental approach drives the market, but it doesn’t tell you the good timing to jump into the market and the technical analysis does it!

Elliott Waves Theory

Very few investors talk about technical approach and fewer investors are successful in the business using technical analysis. But it is not the case of Robert R Prechter which is very well known for the Elliott Waves Theory which has been using nowadays as well!

Therefore, putting these topics in these perspectives you have to choose your market approach…

You know already that if you will be focused on the technical approach you shouldn’t take the risk of predicting more than you might know with that approach.

The best approach is when you combine the two approaches in order to maximize your profits and reduce your risk!

Note that this is just my opinion!