Fundamental analysis

Trading Discussion News and Economy
1

Hey traders!

Currently I’m mostly a technical swing trader, in order to diversify my trading I’m already trying for a while to create a fundamental based strategy for longer term trades and a better R:R. I’ve read many different books on this, but really struggling to find direction in this jungle as there are many fundamental factors at play and very different for each pair (CAD/JPY highly oil and risk driven, while others much less i.e.)

I’ve chosen to mainly focus on monetary policy / forecasting and bond yield differentials, of which I have two questions:

  1. How to create a strategy around this and which pairs should we avoid. I.e. is CAD/JPY not mostly risk and oil driven, and much less monetary policy?

  2. Eventhough I’m a technical trader, I find it very hard to find the right technical approach to a fundamental based direction in a currency pair. Reason being is that you can catch a technical swing, but to buy/sell and hold for the longer term may stop you out as we don’t know how far the market will pullback first before it resumes the fundamental direction. Which zones should we pick to enter and what to do with our stop?

One last question, I’ve been as well looking to find a useful course for getting a better grip on fundamental analysis in forex. If anyone can recommend some quality stuff it would be very welcome.

Thanks!

2

News events especially like NFPR’s and interest rate announcements are the bane of most traders’ lives.

You’re watching price moving along very calmly and then you realise too late Oh my God its NFPR’s! And boom, price goes up out of the top of the screen and then crash down through the bottom of the screen and 3 minutes later it settles back where it was. Like nothing had happened.

Except your stop-loss was hit and now you’re out. Or your entry order was hit and now you’re long but you’re already losing big time and its only been 3 minutes.

4

Hi Jckbt,

Thanks for taking the time to answer.

I’ve researched the FX-ED strategy of Ed Ponsi to enter trades on a 10 day/week MA with fundamentals in favour, but while backtesting different strategies around this concept I didn’t get satisfactory results for myself.

Considering the CAD/JPY pair, let’s assume we find the CAD/JPY correlates heavily to oil prices and let’s assume the oil prices are trending up and the pair has a positive carry, would this be enough to enter the CAD/JPY long when an uptrend on the charts is visible and stay long until CAD/JPY makes a lower high or double top and/or oil prices have peaked and start to trend lower? Or should we include more economic data? I want to keep a strategy simple, without excluding important factors in my analysis.

And then again, how to enter? I like S/R and fibonacci retracements as entry zones but see that especially yen pairs can be very volatile and just take off without ever looking back.

How to get into this hypothetical carry trade? We don’t want to miss entry and we dont want to enter too early and be stopped out. Besides we don’t know exactly which EMA or MA will be respected.

Thanks again.

5

Nice one there @tommor! Look no further @PetyaNL

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Yes, getting spiked out is now prevalent in todays currency markets. Makes me consider focusing on major Indices instead, but that would be mainly scalping, which is another world…

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8

I’m mostly trading daily S/R; both trend continuation as reversals. Entries most of the time in the form of patterns on the 4HR and 1HR charts. From my own experience using an ATR based stop helps me to minimize being spiked out.

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You could be better off trading the daily charts ATR, and using the 4hr as entry, and ensuring the 1hr is in accord with the trend.

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How does your bread and butter strategy look like?

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Hello Petya!
I try to do my technical analysis and just care about really important news (that might blow the whole market)
But fundamental analysis can be useful too! I suggest you read some general books about that (such as books about politics/economy) and then just follow the market and news and check how each piece of news affects the market! It might take a long time but if you are interested, do It! NO PAIN NO GAIN!
Best Luck/

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