There are two basic methods that traders use in determining when to enter the market when trading the stock, Forex, and futures markets, which are: Fundamental analysis which seeks to determine the value of a financial instrument by analyzing all the things such as the balance sheet of a company when trading stocks, or interest rate expectations when trading currencies to try and estimate whether a particular financial instrument is over or under valued.
Technical analysis on the other hand focuses purely on historical price action of a particular instrument to determine whether the instrument is more likely to increase or decrease in value in the future, and therefore how it should be traded. Although there are exceptions to this, as a general rule, longer term investors tend to base their trading decisions on fundamentals and shorter term traders tend to focus more on technicals.
From my experience, although active traders tend to focus more on technicals than fundamentals, they still have an understanding of fundamentals and many consider fundamental factors in their trading decisions along with their technically based analysis.
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