Confusion with Fundamentals

Beginner Questions
1

So today was the first day that I intended to trade using fundamental analysis. I prepared my charts to get ready for seeing initial movements off the back of the US NFP results.

These came in positively with better than forecast numbers (13:30 8th December 2017) so I made an assumption that this would be good for the dollar and traded as appropriate to that assumption.

Low and behold, the market did the opposite to what I expected. The dollar weakened in the timeframe and i hit all my stop losses.

I figure there could be a few reasons for this:

  1. The initial volatility just threw me out but the charts will show a stronger dollar over a longer time frame.
  2. Some confusion about forecasts vs. actual vs. previous. I.e - the results were worse than previous but better than forecast. Does ‘actual vs previous’ hold more weight than ‘actual vs forecast’.
  3. I have misunderstood the NFP data.
  4. There are currently larger concerns for the dollar (perhaps interest rate being next week?)

Would really appreciated any advise on the matter.

Thanks all.

2

You mean a lot more than just “trade using fundamental analysis”, it seems.

You’re actually referring specifically to “entering trades on the basis of announcements”, otherwise known as “trading the news”.

I urge you not to do this.

This is normal, when you “trade the news”.

It’s easy to get the overall direction right, and still lose money.

This is one of the (many) reasons why you shouldn’t try to do it.

This kind of thing is also quite common, and is another reason for avoiding this type of trading.

Here’s the main point: there are fundamentals and there are technicals. When it comes to fundamentals, this post from a couple of days ago may help you -

1 Like
3

Thanks, man. Your help advise is greatly appreciated.

1 Like
4

Forex is not the stock market. A company has actual assets, such as factories, stock, intellectual property, and so on. You can, with enough effort, put together something like a ‘true value’ for a company and see if the shares are over or under valued.

That does not work nearly as well on the foreign exchange. Not only is it much, much harder to come up with a ‘true value’ for an entire country, but each currency pair is a battle between two different nations, so you need come up with a second ‘true value’ and try to then make a meaningful comparison between them. Because that, after all, is what an exchange rate is all about.

So while fundamentals play a role, especially in longer term positions, they are not nearly as much of a stand-alone strategy they way they can be when trading stocks.

And @LaughingCharlie is absolutely right, don’t trade the news. News time is algo time. Keep well clear.

2 Likes
5

News events like NFPR affect price. But price is moved by the big institutional players. If they don’t move price on some news, its because they don’t see it as very important or because they daren’t deploy any capital until some more information emerges. If they see it as good they buy and drive price up: if they see it as bad, they sell and drive price down.

If you’re not doing what they are doing you must by implication believe that you are smarter than all those firms, or have some information they don’t have, or you are just able to deploy capital more quickly. Do any of these really sound likely?

1 Like
6

Welcome to Non Farms

i suggest trying your strategy again, in a time of Low to Medium volatility

2 Likes
7

George, stick with learning FA.

Yesterday you maybe traded Eur/Usd based on NFP.

The other side of that trade, the Euro, was in play from early morning EU time, that play took centre stage, the NFP was as expected, i.e the numbers were good, so no shocks, the bots remained with their programme from earlier in the day which was to add to Euro buys.

It’s a long story involving UK/EU and Brexit, - FA takes time, lots of time, and it takes interest which I suspect you have…

As Charlie says, news trading is not FA, get to learn FA on one currency and then maybe specialize on that one, often your own currency is a good starting place to learn.

1 Like
8

Btw, my own specialty is Eur/Gbp for various reasons.

By learning the FA I can get a sense of market reaction up ahead.

If you traded Eur/Usd then you fell victim to buy the rumour/ sell the fact.

9

Which bots are you referring to that added euro buys on friday’s dip?
Brokers reported limits hit @1.18 thursday, but friday’s lows weren’t deep enough to trigger the next batch.

10

The relevant level is time, the info was already in the market as per my post.

My post was specific about time, that was important, Tusk had booked 10 mins before Europe market open for press, i.e 07.50am, he had to fly to Hungary at 08.15 am.

PM May went to Europe at 03.30am to sign, used RAF to do so.

All this took place during Asian, whilst they sold EURX

An efficient bot will buy at best, the best acted at 09.00am gmt (up arrow)

11

The bulk of the next significant round of buy triggers in EURUSD following week commencing November 20 were placed at 1.18 on Thursday.

In fact the majority of those 1.18 plays were flat leading into friday, having already taken profit. The next level of significant bulk was/is back around the 1.17 level which wasn’t hit on friday.

Anyway, we’ll leave it there.

12

Hello mate, I have a lot to write, but I don’t want you to spend an hour reading my comment. So I will try to summery my comment and You are welcome to ask me any question. You can also choose a topic which we discuss together.
You want to trade the news… Good! good quantitative of pips and fast money. But a huge risk. It also requires a deep understanding of fundamentals, quick reaction and much practice. I’m sorry, I can not agree to the users, who say, that you should not trade the news or that could happen in trading the news. You can trade what you want/ what you can. Now let’s start with a short summary about the fundamentals and a view over the US economy. Then I’d like to follow with analysis of the NFP report.

To make it simple, think about fundamental as hawkish and dovish. Is it one or zero? And think from the point of view of the policy makers. From the absolute fundamental view, the EURUSD is moving in a downtrend as it’s long term trend. That’s because the FOMC is hawkish and the ECB is dovish. That was the situation in 2016. The EURUSD has moved in a downtrend till the current US president has won the elections. The downtrend that followed the 9th of Nov. was a price bottom, that has been set through the hedge funders and no real strength for the USD. The doubts about the political situation and it’s side effects on the economic situation leaked fears into both markets and the FOMC. So the FOMC hasn’t raised the interest over 2017, which has dragged the USD down against all currencies this year. at the end of November 2017, some investors had a very little hope that the FOMC will increase the interest rate in December, which will not happen. Now for the NFP. First let me tell you an important fact. The expectations that are posted in the online calendar, don’t mean any value at all when it comes to fundamental analysis. They are sometimes important for the price reaction following the news release, but sometimes they don’t make any effect, as they are just one factor of many other factors causing the price reaction following the news release. I have expected the NFP news release to be a non event or a negative event for the USD. When you decide to analyze the NFP, you should start from the main overview on the both currencies’ economies. That’s why the GBP has lost value against the USD while all other currencies have ended the day gaining against the USD on Friday after the NFP. After you have chosen the best pair to trade, you start analyze the NFP report itself. It’s absolutely the wrong way to just check the previous number and the expectations. The Jobs number is not the only report, which be released on the first Friday of each month. The average earnings is as important as the jobs number and sometimes more important. Now if you take a look at the numbers of the previous months, you will find that the numbers were really weak over the previous two quarters. That means you need a really high number to break this weakness. And how has the number come out? Just 30K over expectation, in addition to the downgrade of the previous number. The second important report which is the earnings report wasn’t much different. The previous numbers weren’t bad, but not satisfying. And this month? less than expectations plus the downgrading of the number of the previous month. One more thing about the NFP report. When the Job market added jobs, and the average earnings decreases, that means that we add more jobs, but in poor quality. This divergence affects the fundamentals negatively.
All in all, if you would have decided to trade the NFP correctly, you may have had set a buy position on the EURUSD as in your case. You know that the news release would be a non event or would drag the USD down. If the news release have had come too good to be real, you would have directly exit the market.

13

Yep, it’s all hindsight, next week is what counts as always.

The OP is asking about FA, I’ve suggested that the CB’s often hold central stage, incoming week allows them that stage, Christmas or no Christmas.

Hmmm, If I were a bot what would I do with 1.17, buy =T, ELSE buy =T.

What would I do with 1.18, take profit? nope, IF 1.18 THEN sell .(fraction)

IF price <1785 .and. price > 1759 THEN buy.

1.19 - pause, check Date() IF Fri=T, then exit=T

What about the other way?

Then I’ve got it wrong, stop hit and I live to trade another week :slight_smile:

As we know it’s not how the bots are programmed, the above are levels or price from the old days, now it’s AI, bots learn from what happened last time.

This week past, Eur/Gbp, on Monday morning the deal was in the bag and GBP was bought by news bots (despite my heads up on Sat) then when it unraveled they sold it,

Thursday evening the deal was in the bag yet again - this time they bought GBP prior to the news and then sold it on confirmation - so learner FA guys were saying wtf, the news was positive GBP and they sold it?

Perhaps we can learn from robots, a robot lawnmower will travel around a garden for it’s first time, it gets stuck in a particular area, the owner has to retrieve it.

It uses GPS to remember the incident, next time it approaches that area from a different angle, and so on until it masters how best to approach that garden area, then it’s approach to that area becomes predictable

14

Gauging the effect on price of economic releases can be difficult because there are numerous variables and underlying fundamental considerations involved.

15

That was beginning of last week. Friday did not record 1900, but today did, now exit time for Christmas.

The first line of the Bot for Monday Dec 11 was to check whether price had gone down to 1700, if not then buy regardless.

Next day price dipped, but see how 1700 was ‘protected’, (the bot’s stop level, last line)

Next day, Wed, 1800 was easily breached so the Bot took some profit - but it was not done (2nd line).

It monitored price and bought in again when price was between 1785 and 1759 on day 4 (third line).

Then it waited for 1.19, - took 3 days longer but it was patient.

What was that particular ‘prediction’ based on?

FA combined with levels.

Btw reasonable chance for over 1900 but it’s gamble time from now for a couple of weeks, different bots.

16

Thank you Sir for your nice advice. But I want to know, for beginners any technical analysis can be for loner positions?

17

I’m not entirely sure I understand your question, but I wouldn’t recommend devoting much time to one-off trades. Instead, you should be looking for a recurring pattern that you can trade over and over again. That way you are bringing an ever increasing expertise to every single trade you make, rather than starting at square one each time.

18

I got the message. For your reply thank you so much.

19

Euro “flash crash” - happened on Christmas Day, being blamed on Spanish elections which is incorrect, there was no shock news there, just the action of bots at some banks - a little gaming.

1900 now will become support methinks.

Euro_flash.jpg210×549 15.2 KB

(image from zero hedge)

20

Why isn’t that showing on the charts ?