i want to know how to trade the market for long term positions using fundamentals. i thought you can only use fundamentals for news. what kind of books or tutorials out there can help me trade with like Pete?
TIA:)
HB
Trading on news isn’t really fundamental trading. That’s just reacting to the difference between market expectations and the actual data release. It’s trading the market’s emotion, I guess you could say.
Trading forex on fundamentals means understanding interest rates in the countries involved, economic growth rates, trade & capital flows, etc. It’s quite complex for forex because you aren’t looking at just one country, you are looking at two for any given currency pair.
This is a complicated game and one that’s really only useful for longer-term positioning. That’s why not a lot of folks go in this direction.
this is from an article found from forexbastards:
"If you’ve been around the forex trading world for a while, you know that there is this constant war going on among traders who use technical analysis and traders who use fundamental analysis. The techs usually say that it’s impossible to trade on the news, because the market moves so fast, and the fundamentalists say that only the news move the market and trying to predict it by looking at some charts and indicators is just silly. Who is right and who is wrong? Let’s try to let go of opinions and beliefs, and use logic to analyze both sides of this argument.
Let’s go to the basics. What moves the forex market? It’s people’s speculations that move the market! The news don’t move the market, and the graphs don’t move the market! It’s people speculating on those news and people speculating on those graphs is what moves the forex market! When 9/11 happened, the dollar went down, not because 9/11 happened! The dollar went down because everyone thought that everyone else will be selling their dollars, so everyone sold the dollars, therefore the dollar went down. When a bunch of traders are looking at the graphs, and they see a head and shoulders pattern signifying that the EUR/USD pair will go down after the price breaks the neck line, EUR/USD doesn’t plummet down because of that graph pattern! EUR/USD plummets down because everybody recognizes that pattern, and they think that everyone will go short on the Euro at the neck break, so everyone goes short, in hopes that everyone else will go short as well, and it creates this price effect!
Here is the real question… How much money is traded based on fundamentals, and how much money is traded on the technical analysis? As far as I know, most big banks, hedge funds, and other big financial institutions trade mostly fundamentally. Obviously those financial institutions have most of world’s money, so when they place their trades, the market moves accordingly. With fundamentals, it’s pretty clear cut, if the report is better than expected for a specific country, that currency goes up, if it’s worse, that currency goes down. What about technicals? It’s pretty obvious that most of technical traders and individual traders don’t have a whole lot of money, even altogether. It’s also pretty obvious that there are more than 100 different indicators, and at any given time, some are showing up and others are showing down. How do you trade that? I guess look at the most popular indicators, and look for confluence of events, only sell when most of them show sell, or mostly buy when most of them show buy. And only do it, when there are no important news coming out. That’s what Peter Bain teaches, and I think he is one of the very few mentors out there, who recognizes this confluence of events among popular indicators, and that’s why he still produces traders that actually make money, using technical analysis. Most other technical analysis gurus, try to impress you with some fancy new indicator that they developed themselves, and obviously most people who trade with it lose money, simply because nobody else is using that indicator, so the market doesn’t respect what that indicator says. I guess if you are still fascinated with technical analysis, you could still learn from Peter Bain, but I am personally so over it.
I betrayed the technical analysis crowd. It makes a lot more sense to me to trade only the fundamentals now. I let go of all the fancy philosophies and speculations in my head, why technical analysis works better, or why fundamental analysis works better. I let my forex account make that decision. I pretty much never lose on my fundamental trades, I spend a lot less time trading the markets, and I actually feel a lot more confident about trading, which gives me a peace of mind in forex. It was super difficult to get peace of mind when trading probabilities of technical analysis. I learned how to trade fundamentals from Thomas Yeomans. I think he is the only mentor who actually makes full time living from trading, and teaches fundamental analysis. I guess, the rest of the people who trade fundamentals, are just too busy making a bunch of money from trading. Even Tom, only takes very limited number of students per month, because he doesn’t want to be answering too many emails. I say, learn from him, while you can, because he may stop teaching any day."
Hello forexcranium
I wish to put few words about above statement.First of all this is one tech vs fondamental observation with elements of analysis wich bring some verry positive arguments at fundamental side.Those arguments of course have a logic that every inteligent human will see just like i did but i can’t aggree that on this world one thing can be done by only 1 way.Imagine 3 people using computer and their task is to copy 1 file from his computer to his floppy.
1st person click with mouse on his file then right click it and choose copy form a menu then go to floppy right click and use paste.
2nd person click on file use shortcut keys “Ctrl + C” then go to flopy and use shorcut keys “Ctrl + V”
3rd One select file then go to menu “Edit” then choose “copy” then go to floppy and the go to “Edit” and then use “paste”.
Who of those people do it right ? Of course everyone of them but they use difrent ways.Most important is that final result is : they all manage to complete their task to copy file to a floppy.Every one of them can bring verry logical arguments that their way is right way.But i will bring you only one argument that for me is realy important they all manage to complete their final task.This is matter of personality and imagination.We all know mentors that use fundamental and make money and we all know mentors that use technical analysis and make money this is fact.Which way to make money is better ? For me answer is both and it depends from personality.
No one can convince me that there are “pure” Fundamental traders and “pure” technicans.Simply for me you need to combine both.Your task is to find wich way fit better to you and your personality and imagination and focus on it.
Best raguards
Vladimir
I’m going to agree with and disagree with some of the points made in that quote.
First, I would refine the statement “It’s people’s speculations that move the market!” to “It’s people’s actions that move the market”. We can speculate all we want, but until we actually buy or sell, it doesn’t mean a thing. Action creates action.
Having been in this forex game for a while, I definitely agree that there are some amazingly self-fulfilling events. When the market is looking for something to happen - for whatever reason - it usually does. I’ve long felt that forex is the most psychological of the markets, which is why the trends tend to be so persistent and readily traded - especially compared to something like the stock market.
This quote here, from what I’ve seen, is just plain wrong - “As far as I know, most big banks, hedge funds, and other big financial institutions trade mostly fundamentally.” Fundamental trading requires a long-term trading view, which most professionals and institutions simply do not have. Some do, but most professional traders are thinking pretty short-term. They are not trading on fundmentals there.
The write up then goes on to directly contradict the earlier statement about how EUR/USD drops following a head-and-shoulders neck line break because everyone is watching it happen and jumps on the trade. If there were no money represented by technical traders, there would be no movement following the pattern break.
One thing to keep in mind is that forex is not just a speculators market. There are actual business transactions going on there, which is how the market developed in the first place. These currency exchanges are not based on either technical or fundamental analysis. They are straight up business transactions to either convert one currency in to another, or to hedge a future conversion.
And let’s not forget about the carry traders - the ones selling low interest rate currencies and buying higher rate ones simply to make the spread. They don’t neatly fall into either the technical or fundamental camp.
i checked out Thomas Yeomans’ ebook page and from the looks of it it seems to a a day trading manual. I dont want to learn to daytrade. i dont care if its possible to be almost perfect with it. i want to learn how PETE gathers ecomonic data, find a posistion based on it and make only 3 -5 trades a year on that. how do you use ecomonic data for long term trading?
Hello honeb
So after 10 years of trade forex you decide that long term trading is better that day trading ? Can you bring to us some of your reasons please.Will be intresting thank you.
Best reguards
Vladimir.
- I dont have the time to sit around waiting for fundamental annoucements
2)IMO day trading requires more work (i dont mind that a whole lot) but there is the researching, the analysis before hand then the quick decision making and analysis just before and after the release. this is definately a find art.not something i want to jump into straight out of graduating from baby pips.
- day trading has never worked well for me in the past. may factors why (i made poor decisions in Money Manag and I used only technicals to make decisions are just to name the big ones). when i was tought to trade it was actually to trade daily charts using moving averages only (so basic but it works).this bored the heck out of me. i wanted to do something so i traded 1min then 5 min then 15 min charts. i was totally ill informed and had it in my head that i had a 50/50 shot of getting it right and having the indicators telling me which position was the right one then How can i loose?lol. so thats pretty much what i did. i settled with the 5 min and early on i made alot of money. probably increased my money by half of my inicial margin in less then 1 week. but lost it all and then some by the end of the month. because of that big win early on, it took me alot of time to accept the fact it was a lucky score. so i worked my way all the down the shart time periods till i found what was most confortable for me and my personal style.
4)day trading doesnt fit my personality. i dont like the fast pace and action. im 21 and some times i feel like im having a heart attack just watching my money go up and down and up and down. even with a demo i find it harder to make decisions and go through all the process. i feel paniced and rushed. i can easily loose more money with longer term trading but i wouldnt feel so bad because i allow myself enough time to justify my position. i rather make a trade, shut it all down and monitor everything every few days.
5)i dont know if i can trust my brokers. MM vs. ECN, ECN vs MM… i hate both but i have to pick one. right now, all i can afford is to go with a MM. with that said, swing trading and holding longer trading positons does help to minimize the risk of being affected by the possible activity of a broker, i would rather take longer positions. the high spreads wont affect you much, the data feed manipulation wont bug you, the possible stop/limit hunting wont mess with you much. for me, it just feels safer now that im starting off fresh and new.i know there is not this huge conspiracy with brokers and they dont go out of their way to cheat their clients out of all their money but i am very mindful about the amount of control my broker has over my account and how successful my trading style can be.
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im really a swinger at heart but i still wouldnt mind taking longer positions then a typical swing trader would.
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Overall, im just really interesting in learning fundamental period. im gonna be studying news trading and maybe even pratice it while i estabish myself as a fairly successful trader. maybe i might give news trading a try later down the road. but overall it cant hurt to learn everything you can. one thing im definately not interested in is scalping.
hope this helps:)