Technical Analysis vs Fundamental Analysis vs Sentiment Analysis: Which is More Suitable for Forex Trading?

Which Forex Analysis Method is Most Suitable for Trading? 

1. Technical Analysis: 

• Visual Charts: Technical analysis provides visual price charts and indicators, making it easy to identify trends, support levels, and resistance levels, especially suitable for short-term operations.
• Quick Response to Market Changes: Technical analysis can provide instant trading signals, helping traders quickly respond to market fluctuations.
• Applicable to Various Markets: Technical analysis can be applied to various markets, whether currency pairs, stocks, or instruments.

• Ignores Fundamental Factors: Technical analysis focuses solely on price movements and may overlook the economic fundamentals and political risks behind the market.
• Short-term Focus: Technical analysis is more suitable for short-term trading, with relatively limited ability to capture long-term trends.

• Short-term Traders: If you prefer day trading or short-term swing trading, technical analysis will be the best choice.
• Traders Who Like Quick Market Entry and Exit: Technical analysis provides instant trading signals, suitable for those looking to capitalize on short-term price fluctuations.

2. Fundamental Analysis: 

• Understanding Long-term Trends: Fundamental analysis helps traders understand the long-term trends of the market, suitable for long-term investors.
• Comprehensive Market Understanding: By analyzing economic data and international politics, fundamental analysis provides an in-depth understanding of the market.

• Not Suitable for Short-term Trading: Fundamental analysis takes time to be effective, making it less flexible for short-term traders.
• Requires Extensive Knowledge: Traders need to have a deep understanding of the global economy, politics, and market mechanisms, which can be challenging for beginners.

• Long-term Investors: If you prefer medium to long-term investment strategies and want to profit from major economic trends, fundamental analysis will be an ideal choice.
• Economic Data Followers: Traders who enjoy analyzing economic data such as GDP, interest rates, and inflation will benefit from fundamental analysis.

3. Sentiment Analysis: 

• Capturing Market Reversals: Sentiment analysis can identify overly optimistic or pessimistic market sentiments, indicating the likelihood of an impending market reversal.
• Complementing Other Analysis Methods: When combined with technical analysis and fundamental analysis, sentiment analysis can provide a more comprehensive understanding of the market.

• Relatively Subjective: Sentiment analysis relies on judgments of market psychology, lacking the precision and data support of technical analysis.
• Short-term Focus: Sentiment analysis is mainly used for short-term trading, with limited predictive power for long-term trends.

• Short-term Reversal Traders: If you focus on capturing market reversal points and want to enter and exit the market quickly during price fluctuations, sentiment analysis will be your ideal tool.
• High-risk Tolerant Traders: Sentiment analysis is suitable for those willing to engage in short-term speculation based on market psychology changes.

4. Comprehensive Analysis Method: 

• Technical Analysis Finds Entry and Exit Points: Use technical analysis to find specific buy and sell points.
• Fundamental Analysis Determines Major Trends: Rely on fundamental analysis to identify the long-term trends of the market.
• Sentiment Analysis Assesses Market Atmosphere: Sentiment analysis can help confirm short-term reversals and the risks of emotional overheating in the market.

Conclusion