Learning using fundamentals in trades

[ahefner33]

Originally Posted by shadow

Anyways I'm trying to help you out as much as possible, and I'm sorry if I failed to do so, if you have any other questions, just ask eh. Best trading to you and I hope you get something out of this post.

No you have helped a lot and many thanks to that.
What your saying though is kind of what I was trying to say or ask. I would look at the news,reports, see whats going on in the two currencies and watch the higher trend? Then I would base my trades on the overall market sentiment? Just having the support of the fundamentals to support my technicals? Thanks again. I would keep repping you but the system will not allow me.

Adam

[ahefner33]

Originally Posted by mdetlh

You sound like you are asking about the current situation. Am I correct? Without getting too long winded I think I can get you up to speed on some fundamentals here.

The most USD negative news in the last 2-3 weeks is the subprime lending market is having trouble with defaults on mortgage loans to less than prime credit worthy individuals. That is the background to the interest rate decision by the USA Fed this week. The other news in this regard is that the Futures market is pricing in another 3 interest rate cuts by the Fed, the Fed isn't obligated to do what the futures market is speculating that the Fed will do. However, other major currencies see the futures market speculating about 3 rate cuts and then the Fed doesn't sound as interested in raising rates as in previous months and so that's another reason to speculate that there may be an imminent cut as in within a month or soon. Hence you see the USD losing across the board in the last couple of weeks. Then the USD gains strength today, cause currency traders start to realize that maybe the Fed isn't all that interested in cutting rates soon after all. Now we wait to see what further reports will show if the housing market, a key factor lately, among others, on whether people speculate whether or not the USD will gain strength or not.
Thats why I panned this blogs decision to go short the AUD/USD, even though the AUD is rarely this high against the USD, cause there maybe AUD rate increases and everyone thinks that there is reason to believe that the USD will cut rates sooner or later.
Does that help?

Hey. So you say that traders realize that there will not be a rate cut, strengthening the dollar, but what about the ones that still speculate that there will be rate cuts, weakening the dollar? Would this cause most Dollar pairs to range? Thanks again. Reps.

[shadow]

Originally Posted by ahefner33

No you have helped a lot and many thanks to that.
What your saying though is kind of what I was trying to say or ask. I would look at the news,reports, see whats going on in the two currencies and watch the higher trend? Then I would base my trades on the overall market sentiment? Just having the support of the fundamentals to support my technicals? Thanks again. I would keep repping you but the system will not allow me.

Adam

Yep, That's pretty much it, you got it, put periods instead of those "?" and your system is a go. If you can mix technicals with fundmentals, go for it. I tried to to do something what you are trying to do, but I used a specific signal. So what I would do was when my signal hit, I would look at the fundamentals and if they were with/against it, I would trade with/against my signal. Not a good idea! Especially if the fundamentals were not there, jeez I couldn't click the button. Make sure whatever your system is, it helps you be decisive, that's the worst position to be in when your trading. Have a great weekend eh!

[mdetlh]

Originally Posted by ahefner33

Hey. So you say that traders realize that there will not be a rate cut, strengthening the dollar, but what about the ones that still speculate that there will be rate cuts, weakening the dollar? Would this cause most Dollar pairs to range? Thanks again. Reps.

Yeah so in this tug a war of bulls and bears, when the USD bulls and the Bears become less sure of USD weekness, then the bulls start to win the moment by moment to day to day tug o war. The currencies with the higher interest rates, like AUD and NZD will continue to drag the USD bulls through the mud until they wave the white flag, others like the EUR are somewhat expected to raise rates, the GBP has the same rate as ours but has numbers to show that inflation may be a problem, but in general the USA is still expected to lower their rates, all the reports that are interesting to financial market geeks like ourselves are part of answering the question of whether or not the USA will raise their rates.
The JPY has a mind of its own with the USD, I get so confused with the USDJPY pair cause that is the only thing the USD is showing strength against. But JPY bulls are routinely losing their tug o war against everyone else because they have the lowest interest rates of anybody at .5%
Probably the best indicator for indicating a range or a trend is the ADX indicator, anything over 25+ and increasing indicates a trend and anything below 25 and decreasing shows a range.
My two favorite books on Forex so far is Day Trading the Currency Market and Technical Analysis for Dummies.
Bloombergs currency section always has good stuff on fundamentals, also check out the commodities and bonds section cause that also may indicate whether or not more fans will pull the tug o war rope for the USD or not.

[ahefner33]

Ok guys/gals. I have another question on what prices typically do after fundamental news reports.

Say some wild news report comes out and spikes price up say EUR/USD by 100 pips. What are your typical experiences with prices after this? I mean does the pair usually trade around that area or does it usually work its way back to where it was before the shock?

How long do most of you typically wait to get back in after these reports?

Thanks and happy MONDAY!

Adam

[shadow]

I think usually when this happens and the spike is against the trend, it usually comes back, but I don't care, and I don't worry about it. When big news is about to come out, I just hedge my position, That way I'm still in the trade and I don't lose money. If the trade goes against, I wait for it to come back, if it does, I eliminate my hedged position and continue to ride the trend, if it keeps going against, I cut both positions with the profit I had going in before the hedge. Best to ya!

[ahefner33]

Originally Posted by shadow

I think usually when this happens and the spike is against the trend, it usually comes back, but I don't care, and I don't worry about it. When big news is about to come out, I just hedge my position, That way I'm still in the trade and I don't lose money. If the trade goes against, I wait for it to come back, if it does, I eliminate my hedged position and continue to ride the trend, if it keeps going against, I cut both positions with the profit I had going in before the hedge. Best to ya!

Hey Shadow.

How would you go about this hedged position? If you were long in a position and the spike is short, how would you setup up your hedge position? Thanks.

Adam

[shadow]

Alright, usually before some big news is coming out, the price will be erratic right. so at this time it'll move back and forth. Just leave your position in and when it moves up a bit sell in a separate order. That way, you one order cancel's out the other, so even though you make pips on one, you lose the exact same on the opposite one. Thus, no lost pips. You don't even have wait for right before the news comes out because you don't lose anything on the hedged position, only the spread, which you can make back if you take it out at break even if it comes back. It depends if you have the balls though (I sure don't) to enter when the price is quite jittery, some people can't pull the trigger. So I usually enter a little while before.