Technical analysis is the foundation of the trading business. Without having strong knowledge in this sector, it is really hard to predict the perfect trading spot. The majority of the traders are spending their time to master the art of technical analysis. By doing so, they often forget the fundamental analysis acts as the price driving catalyst.
So, if you intend to trade with the technical data only, trading might not be a pleasant business. Those who are thinking, analyzing technical and fundamental data at the same time is a very time-consuming process that can take advantage of the EAs.
Why do we need EAs?
EAs are specially designed tools that are synchronized with the trading platform. The advanced coding of the EAs allows investors to find critical data. If this was done manually, things would have been very hectic and the traders have to spend hours analyzing the technical and fundamental data.
The EAs perform 4 major functions.
These are –
- Extracting technical data
- Extracting fundamental data
- Assessing the market momentum
- Evaluating the result with historic data
If you intend to perform these four functions in the manual method, it might take a day or two to assess the state of a single asset. But the EAs can perform this complex calculation and create a summary that you can use in real-life trading.
But how do we blend the technical and fundamental data to improve our trading process? Well, you can follow many different ways but we are going to give some tips followed by the experts in the investment industry.
Finding the significant technical levels
Trading the minor level is not going to work. Even if you follow the rules of money management, you are not going to become a profitable trader. But finding the significant levels in the market is relatively tough. You might even know which levels are significant enough to place the trades. But this problem can be solved easily with the help of the technical EAs. The technical EAs can analyze the price data with a high level of accuracy and find the most significant levels of the market. Once the significant levels are identified, it’s time to switch to fundamental EAs.
Use of the fundamental EAs
After you have spotted the technical place to place the trade, you should not jump into the real trade. Try to understand the summary created by the fundamental data. If you are trying to trade the reversal, you need strong news which will favor the technical reversal. On the contrary, trading with the trend is much easier when it comes to analyzing the technical data.
So, it’s very obvious, the obstacles you are going to face depends a lot on your trading method. To cut down the risk factors, try to stick to the trend. But if you love to enjoy the newly formed trend, you can trade the reversal with strong economic data.
Blending technical and fundamental data
Extracting data from technical and fundamental EAs are easy. But things become challenging when you try to blend things up. Most of the time, timing issues create a major problem. Let’s say, you are taking the technical data from the 30-minute time frame by using the EAs. And if you try to synchronize the technical data to the high impact news, you might not be able to do it as a 30-minute time frame might exhibit a bigger retracement phase of the trend whereas the fundamental data will show trending movement.
So, how to solve this issue? The easiest way is to use the higher time frame in technical analysis. But if you find it boring, you can switch to the lower time frame and start taking the low impact news data. To make things easier, a lower time frame trading method requires the low impact news. If you trade the time frame from 30 minutes to 1 hour, you have to deal with the medium impact news. And choosing the time frame above 1 hour requires the use of high impact news. By using this simple method you can synchronize the technical and fundamental EAs in the Forex market.
Testing your EAs
After synchronizing the fundamental and technical EAs, you have to rigorously test its performance. The testing should be done in the virtual account so that you don’t have to lose any real money. If you can manage to make consistent profit in the demo environment with the blended technical and fundamental data, you can consider the system is ready to go for live trading. But remember the fact, nothing is perfect in the investment industry. So, keep on revising your trading method to fix the bugs in the strategy.