Fundamental analysis in Forex is a type of market analysis which involves studying of which fundamental reports move the forex the most economic situation of countries to trade currencies more effectively. It gives information on how the big political and economical events influence currency market. Figures and statements given in speeches by important politicians and economists are known among the traders as economical announcements that have great impact on currency market moves.
But when news are due, traders have to check the actual data. If to look at oil prices, a rising price will result in weakening of currencies for countries which depend on huge oil import, e. Whose speeches to keep an eye on? Chairman of the Federal Reserve Bank of USA, Secretary of the Treasury, President of the Federal Reserve Bank of San Francisco and so on.
Traditionally, if a country raises its interest rates, its currency will strengthen because investors will shift their assets to that country to gain higher returns. Decreases in the payroll employment are considered as signs of a weak economic activity that could eventually lead to lower interest rates, which has negative impact on the currency. A country that has a significant Trade Balance deficit will generally have a weak currency as there will be continuous commercial sellings of its currency. GDP is reported quarterly and is followed very closely as it is a primary indicator of the strength of economic activity. A high GDP figure is usually followed by expectations of higher interest rates, which is mostly positive for the currency. When it comes to news trading Forex brokers, however, may not be supportive of traders intensions to trade during news announcements.
There has been practices reported when Forex brokers simply freeze platforms during news, so that no trades can be opened or closed. Forex trading is a high risk investment. All materials are published for educational purposes only. Tuesday, 5 June 2018, Lugano Switzerland, trade. USD Currency Pair Stretches Solid Up-move Beyond 0.
LOOK: FTSE 100 Share Index Price Forecast, Sept. Read about FX from a different angle. Economy-based analysis on current events and how they impact currency rates on moneytransfercomparison. Risk Disclaimer: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite.
The Authority’ on Price Action Trading. In 2016, Nial won the Million Dollar Trader Competition. I believe very strongly that the price action of a market reflects everything we need to know about it. I personally don’t trade the news or use fundamental analysis in my trading, and I honestly feel it is a big part of why I’ve been successful in trading. Are you a technical or fundamental trader? It is my hope, after reading this article and some of my other lessons on news trading and fundamentals, that you will give a long hard think into what really makes sense to you and what doesn’t.
I firmly believe that traders need to choose between technical analysis and fundamental analysis. I also do not believe in combining them. Trading, perhaps more than any other profession in the world, is an extremely easy thing to over-complicate. It is my belief, that by cutting out all news and fundamental analysis you can quickly and permanently eliminate half of the clutter from your mind that’s causing you to over-think and over-complicate trading. At Learn To Trade The Market, we subscribe to the belief that price action is the best way to define the market, analyze it and find trade setups.
Therefore, we believe that the underlying price current and price dynamics are what determine what a market will do next, not for example, the Russians moving troops into the Ukraine as we saw recently. Financial media outlets want you to believe otherwise, that’s why the mainstream consensus is that there’s always a fundamental reason behind price movement. There’s an entire industry that depends on making you believe economic news reports and world news is what moves the markets and is what you should pay attention to. You see, the key reason why the news simply doesn’t matter and why I will never trade based on it, is because what really matters is what market participants THINK about how the news will affect the market.
People trade their views on a market, which are often contradictory to the news and what it implies. It’s important to note that the examples below of Oil and Gold took place over about the last two months. In both cases, the price action was clearly leading the news because we had obvious uptrends in both markets. One good example is the recent geopolitical unrest in the Ukraine, with Russia threatening military force there to take the Crimea peninsula. Typically, commodities like Oil and Gold will rally during threats of war, especially in countries rich with natural resources like Russia.