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  • Ligor Fund - Fundamental analysis vs. technical analysis – which is better?

That entirely depends on your trading strategy. Actually, why not use both? Most market analysis methods work best when they’re combined with other methods or indicators. This way, there’s a bigger chance of finding more reliable investment opportunities. Combining different trading strategies can also help eliminate biases from your decision-making process.

This concept is sometimes referred to as confluence. Confluence traders combine multiple strategies into one that harnesses benefits from all of them. The idea is that the trading opportunities presented by the combined strategies may be stronger than the ones provided by only one strategy.

What drives the financial markets?

The price of an asset is simply determined by the balance of supply and demand. In other words, it’s decided by the buyers and sellers. Where supply meets demand, there’s a market. But what else can drive the value of a financial asset?

As we’ve discussed earlier, there can be fundamental factors, such as the state of the economy. In addition, there can be technical factors like the market capitalization of a cryptocurrency. Also, there may be other factors to consider, such as market sentiment or recent news.

However, these are just that – factors to consider. What really determines the price of an asset in a given moment is simply the balance of supply and demand.

What is a market trend?

A market trend is the overall direction where the price of an asset is going. In technical analysis, market trends are typically identified using price action, trend lines, or even key moving averages.

Generally, there are two main types of market trends: bull and bear market. A bull market consists of a sustained uptrend, where prices are continually going up. A bear market consists of a sustained downtrend, where prices are continually going down. In addition, we can also identify consolidating, or “sideways” markets, where there isn’t a clear directional trend.

It’s worth noting that a market trend doesn’t mean that the price is always going in the direction of the trend. A prolonged bull market will have smaller bear trends contained with it, and vice versa. This is simply just the nature of market trends. It’s a matter of perspective as it all depends on the time frame you are looking at. Market trends on higher time frames will always have more significance than market trends on lower time frames.

A peculiar thing about market trends is that they can only be determined with absolute certainty in hindsight. You may have heard about the concept of hindsight bias, which refers to the tendency of people to convince themselves that they accurately predicted an event before it happened. As you’d imagine, hindsight bias can have a significant impact on the process of identifying market trends and making trading decisions.

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