Fundamental and Technical Analysis: A Complete Beginner's Guide

Psychology in Trading: why even the best analysis doesn't work without it

If you remove the marketing noise and memes from the fintech world, the simple truth remains: about 70% of a trader's success depends not on strategy, but on psychology.

It sounds corny, but it determines whether you can put your knowledge into practice, or make a deposit faster than the terminal loads.

"Psychology" here does not mean an abstract "self-belief", but rather very specific skills: emotion control, discipline, the ability to limit losses and not chase profits. One of the best examples is the so—called loss aversion (unwillingness to fix losses): according to a study by Prospect Theory for Online Financial Trading, which analyzed more than 28.5 million transactions, traders on average close profits too early and hold losses for too long. This is not a strategy problem — it is a behavior failure.

Psychology hits harder than any news.

Imagine a classic situation: the level is broken, the candle flies up, and you are covered by FOMO — the fear of missing a move. You log in without confirmation, and after a couple of minutes the market turns against you. Or vice versa: the deal went into negative territory, but you keep it “just a little more”, hoping for a reversal. In both cases, the decision is made not by the plan, but by emotions — and the result is predictable.

Even the most ideal strategy does not work in the hands of a trader who cannot click "Close" on a loss or violates his own rules. That's why analysis without psychology won't save you, and psychology without analysis doesn't make sense.

But there is another side. Understanding the market, its logic and mechanisms is equally important. If you don't know how to read reports, don't know what P/E is, and don't understand how the news about the Fed rate will affect liquidity, no amount of "iron discipline" will turn you into a trader.

Therefore, remember the key principle.:

Psychology and analysis are not competitors, but two sides of the same system. The first keeps you from making mistakes, the second helps you avoid making them.

If you are a beginner and want to understand the database, start with a simple one — the article "How not to drain a deposit in trading". It will help you build a basic discipline and understand how to integrate psychology into the system.

Fundamental analysis: how to understand companies and the logic of the market

If technical analysis answers the question "when to enter?", then fundamental analysis is about "what is it worth entering?".

He examines the company's business model, financial performance, macroeconomic conditions, and market expectations to understand whether an asset is overvalued, undervalued, or fairly valued.

What fundamental analysis includes:

1. quarterly and annual reports of companies (revenue, profit, marginality);
2. multipliers (P/E, P/S, P/B, etc.);
3. news about mergers, licenses, lawsuits, buyback programs;
4. macroeconomics — inflation, Fed rates, employment data, etc.

It's not just working with numbers. This is an attempt to understand the future distribution of supply and demand, because the market almost always trades expectations rather than the current state.

Practical example: $AVGO vs. $BAC

1. Broadcom ($AVGO) may have a P/E ratio of about 90 — and this is not an “overestimation.” This is a reflection of expectations: the market believes in the rapid growth in demand for chips, AI infrastructure and data centers.
2. Bank of America's ($BAC) P/E remains at 15 because the banking business is more stable and depends on macroeconomics and regulators. There is no “premium for the future” here — there is a projected profit and moderate growth rates.

The difference is not that one company is “more expensive”, but that their business models, risks, and horizons are completely different. And this is the essence of fundamental analysis.

Even if you plan to work inside the day, a basic understanding of the fundamentals will help you avoid typical pitfalls. For example, if a stock looks "cheap" technically, but its business is losing key market segments, long may become an expensive mistake.

And if you want to understand more deeply why the market values the future more than the present, I recommend the material "How to find entry and exit points", where this is explained using real examples.

Technical analysis: candlesticks, indicators and price behavior

If fundamental analysis answers the question "what to buy," then technical analysis is about "when to buy or sell."

It is based on a simple but powerful principle: all available information is already embedded in the price, which means that by studying the chart itself, you can understand the behavior of market participants.

Basic technical analysis tools:

1. Candle charts are the basic language of the market. Each candle shows where the forces of buyers and sellers were, and their combinations form patterns. Learn more about how to read them →
2. Indicators such as the RSI, MACD, SMA/EMA help you assess trends, overbought conditions, or divergences.
3. Shapes and patterns — "head and shoulders", flags, triangles show probable reversals or continuation of movement.

Example: Even if Netflix shows profit growth but reports a 5% decrease in subscribers, the stock may plummet. This is a fundamental factor. But technical analysis will show you the market reaction itself — and that's what you're trading.

Limitations of technical analysis

It is important not to deceive yourself here: everyone sees the charts. And if you see a “perfect pattern," thousands of other traders and algorithms can see it.

What this means in practice:

Technical analysis works, but it is not a panacea. Algorithms can disrupt stops (“stop hunting"), change liquidity, and accelerate price movement. Therefore, technical analysis should be perceived not as a tool for "predicting the future", but as a way to read the current behavior of participants and the reaction to fundamental events.

Algorithmic Trading and HFT: why it's important for a beginner to know

It's not just people who operate in the market. HFT (high-frequency trading) and algorithmic strategies form a significant part of the volumes on the exchange.

They operate at speeds unattainable by humans and use simple but powerful techniques.:

1. orders are placed and immediately withdrawn, creating false liquidity levels;
2. they collect clusters of stops and then turn the price in the other direction;
3. they analyze the ribbon of prints and the depth of the glass, reacting faster than anyone else.

To understand how orders affect the movement, I advise you to read the article "Types of orders in trading".

Fundamental vs. Technical Analysis: what to choose for a trader

The main question that every beginner asks himself is: "Which is more important — fundamental or technical analysis?"

The answer does not depend on preferences, but on the trading horizon.

If you are an investor for months and years, fundamental analysis is more important. He explains which companies and sectors will be stronger than the market, which are undervalued, and which are overvalued.

If you are a day trader or a swing trader, technical analysis comes to the fore. Here, the reaction to news, levels, impulses and volumes is important.

This is not a theory, it's a statistic.

In a study of 692 fund managers, fundamental analysis on average received about 67% of the weight in decision—making, while technical analysis received 23%. But on short horizons, the situation is changing: in the FX market, up to 90% of traders use technical analysis for less than a week.

How do both approaches work together?

Experienced traders almost never choose one thing. They combine fundamental and technical analysis because their tasks are different.:

1. The fundamental answers the question: what to invest in and why exactly this asset will grow.
2. The technical analysis answers the question: where and when to enter, so that the risk is minimal and the potential is maximum.

Example:

The company publishes a strong report — you understand the fundamental reason for the growth. But at the same time, the chart drops at increased volumes. This is a signal to wait for confirmation, for example, the formation of a base or a breakdown of the level. This is how the combination of fundamental and technical analysis works.

Traders' Mistakes: Myths about Fundamental and Technical Analysis

The biggest losses in the market are not due to "incorrect analysis", but due to a one-sided approach to it. Beginners often make two opposite mistakes:

1. Blindly trust the fundamental.

For example, a weak report is released, the forecast decreases, and the trader immediately opens a short. But if the market is waiting for a merger, a major contract, or a review of the industry, stocks may, on the contrary, fly up.

This was the case with $NVDA in May 2023: despite concerns about valuation, the stock rose 25% in a day after a strong AI guidance, completely ignoring weak margin metrics.

2. They rely only on technology.

The stock looks "perfect" on the chart, but its capitalization has doubled in recent months — institutions can start taking profits.

Example: in the spring of 2024, $META shares technically broke through resistance, but immediately after that they fell by 18% after revenue forecasts were revised.

What the statistics say:

According to the European regulator ESMA, between 74% and 89% of retail CFD and forex traders lose money. The average figure is about 75-80% of unprofitable accounts.

The reason is not the lack of analysis, but its incorrect application.:

1. Some people don't understand the fundamentals and lose out on unexpected news.;
2. others ignore the timing and enter the "perfect pattern" at the moment of the trend change.

If you want to understand the price behavior in the news in more depth, I recommend the material "Gap in trading: Gap trading strategies" — it will help link the analysis with the market reaction.

Conclusion: psychology, fundamentals and technology are the three pillars of trading

Now the whole picture adds up to a system:

1. Psychology is the foundation of a trader. Without discipline, emotion control, and risk management, even the best strategy will turn into a casino game.
2. Fundamental analysis explains why the market is moving. It shows which companies or assets have long—term potential and which are at risk.
3. Technical analysis shows where and when to enter and exit in order to catch the movement and manage the risk.

Each of these elements is incomplete individually.

1. Fundamental analysis without technical analysis turns you into a long-term optimist who can wait for years for a "rebound".
2. Technical analysis without fundamentals is like shooting blindly: you see candles, but you don't understand why they are there.
3. And psychology without both is the belief in a miracle.

A strong trader is not someone who knows the "ideal" way to analyze, but someone who knows how to combine all three approaches and apply them consistently.

FAQ: Frequently Asked Questions about fundamental and technical analysis

1. What is fundamental analysis in simple terms?

This is an assessment of a company or asset based on its finances, news, and growth prospects. He answers the main question: is it worth investing at all?

2. Why do we need technical analysis if there is a fundamental?

It helps you choose the moment of entry and exit. Even a strong company can be at its peak — without technical analysis, you risk entering too early or too late.

3. Is it possible to trade only on fundamental analysis?

It is possible, but this is the path of an investor, not an active trader. On short horizons with no schedule or levels, it's easy to get into the market at the wrong time.

4. Is it possible to trade only on technical analysis?

Many people do this, but it's risky. Technical analysis shows a reaction to the fundamental, but without context, you can get into an "ideal pattern" that collapses because of one piece of news.

5. What is more important — fundamental or technical?

It depends on the horizon. In long—term training, fundamentals are more important; in intraday and swing, technology is more important. But their combination gives the best result.

6. Is it true that 80% of traders lose money?

Yes. According to ESMA, between 74% and 89% of retail traders lose their deposit. The main reason is the incorrect application of the analysis.

7. Which is more important: psychology or analysis?

Psychology determines whether you will be able to apply knowledge in practice. Without it, even the most accurate strategy will not bring results.

If you want to take the next step and link analysis to money management, I advise you to read the material "What is the ratio of risk to profit in trading". He explains how to combine fundamentals, engineering, and risk management into one system.