Fundamental analysis tells you what to trade and why. Technical analysis tells you when, where your idea is wrong, and therefore how much you can risk. Neither answers the other's question.
The division of labour
| Question | Answered by | In practice |
|---|---|---|
| What should I be looking at? | Fundamental | Screening, sector work, macro regime |
| Why might this move? | Fundamental | A specific thesis you can write in one sentence |
| When do I act? | Technical | A level, a structure break, a pullback into support |
| Where am I wrong? | Technical | A price that invalidates the setup — your stop |
| How much do I risk? | Both | Stop distance sets size; conviction sets the risk percentage |
| When do I exit? | Both | Thesis broken (fundamental) or level lost (technical) |
A worked example
Suppose your macro read is that the central bank is closer to cutting rates than the market believes, which should favour rate-sensitive sectors. That is a fundamental thesis — and on its own, entirely untradeable. It has no entry, no invalidation and no size.
- 1Narrow it fundamentally
Which companies genuinely benefit? Filter for those with the balance sheet to survive if you are early and wrong on timing.
- 2Check the structure
Is the chart in a downtrend still making lower lows? Being fundamentally right and technically early is how positions get abandoned at the worst moment.
- 3Wait for a level
Identify support, a range edge, or a change of character showing the decline is losing control.
- 4Define invalidation
A price below which your idea is simply wrong for now. This is your stop, and it must be structural — not a round percentage.
- 5Size from the stop
Distance to invalidation plus your risk percentage gives position size. Do this arithmetically, never by feel.
- 6Define both exits
Technical: the level fails. Fundamental: the central bank turns hawkish and the thesis is dead. Either one closes the trade.
When they disagree
This is the interesting case, and there is a reliable rule: the chart is the more urgent signal; the fundamentals are the more durable one.
- Fundamentally attractive, technically broken — the market may know something you do not. Wait. Being early is indistinguishable from being wrong while you are losing money.
- Technically strong, fundamentally poor — tradeable, but as a shorter-term trade with a tighter stop, not a position you defend. Momentum can carry a bad business a long way, and then it stops abruptly.
- Both aligned — the trades worth waiting for. Rare, which is why patience is a genuine edge.
Matching the approach to your horizon
| Horizon | Fundamental weight | Technical weight |
|---|---|---|
| Scalping (minutes) | Almost none — but know the calendar | Nearly everything |
| Day trading | Low — avoid event risk | High |
| Swing trading (days–weeks) | Moderate — direction and catalyst | High — timing and risk |
| Position (months) | High | Moderate — entry and exit refinement |
| Investing (years) | Dominant | Low — mostly avoiding terrible entry timing |
Notice that technical analysis never drops to zero and fundamentals never do either. Even a long-term investor benefits from not buying into a vertical spike, and even a scalper needs to know that an inflation print lands in ten minutes.