Fundamental analysis

Trading Discussion News and Economy
1

Basically, fundamental analysis is one of the forex trading system that combines the news in the economic sector, politics and security in a country and integrate with the market reaction to the news presented is to be able to know where the destination country’s currency price of the

A key part of this analysis is demmand and supply. Basically, market participants are human, too. By measuring more people who buy action (demmand) or the opposite of sell (supply) then we can know where prices will move. In short, if demmand increases while supply remains the staple food like in the homeland, the price will soon climb. And vice versa when the supply (supply) is increasing but still demmand then prices will begin to fall due to a lot of goods in the market.

Sometimes the market price is also often driven by emotion for a moment, without any economic news is often the case action increase or decrease the price of the currency. This is usually caused by a shift in supply due to demmand certain parties who make purchases or sales action in large numbers.

News fundamental role in determining rise and fall of currency values is the economic news. Information such as unemployment rates, consumer confidence index and the producer or the kind of news the other determines whether a currency will be strengthened or weakened against other currency pairs.

Most of the news refers to the rise and fall of inflation in a country. In circumstances where inflation began to walk toward up, then usually the central bank will raise interest rates. The increase in interest rates in a country will generally follow an increase in temporary (but large) in the currency. Logically this can be caused by the banking sector also raised interest rates, including interest rate and savings deposits. This triggered more and more funds are collected in the bank so that money circulating in the market will be reduced. Demmand unlawful supply when the supply is reduced, prices will rise. Even if the banks in those countries did not participate adjust the interest rate is the psychology and outlook of the traders remain so. As a result they immediately take action that will lead to buy demmand increase.

There are dozens of fundamental news that could affect the future market movements. There are fundamental news that is important to note there are also fundamental news that is not needed at all due to various factors. In this case it is important to sort out the fundamental news is important and not important.
For this fundamental analysis you can visit the Forex Factory site, they will complete our site news2 list that will come out and what time the news will come out usually in the list they will have a picture that is 3 columns previous column (reply containing data about the effect on the news they will be in the past ) and Forecast (predict the effect the forthcoming news tabs tsb currency), as well as actual (ie, washed-effects occur when news was released.

Then when the actual value was announced, there will be three possibilities that may occur:

  1. Actual value is greater than forecast: Retail Sales in the case then this will result in the currency will strengthen further because the results were far better than expected.

  2. Little actual value of the forecast but still above prevoius: in this case we this time, this will result in weaker currency because of what it expected the market does not happen.

  3. Below the actual value and the previous forecast: Of course, the currency will weaken rapidly as it misses forecast calculations much with reality.

Some Fundamental Analysis Information Sources:

  1. forexfacory.com
    Each word was given an icon / sign of how the news affects the market.
    This was very helpful, especially for traders who use volatile strategies.

  2. forexnews.com
    News served 24 hours nonstop. Website that will make you to see the general picture of how the news and affect the central bank foreign exchange market.

  3. fxstreet.com
    Fairly comprehensive site that displays a list of news and analysis strategies.

  4. currencypro.com
    Click the menu “Today’s Market Research” and you will find a pretty good analysis.

  5. saxobank.com
    Forex Trading Strategies click to see the reviews they will price movement today.
    There are also some links analysis of several other sites in collaboration with saxobank.

2

I have a few points about fundamental analysis that concern me:

  1. Insider trading is not illegal in over the counter FX.
  2. Big traders almost always have the news faster than you do (notice how the prices always begin to move just before CNBC releases the numbers), and they can pay people to watch many different news channels around the world to act on late breaking developments.
  3. Big traders have staffs of MBA trained analysts who can tear apart the federal reserve minutes faster than you can read the first paragraph.
  4. Big traders have the money to hire PI firms to get leads on fundamental data.
  5. Big traders hire trading consultants that have years of market experience and developed an excellent gut for market reactions on fundamentals.

Given those five points, I have no idea how small traders can have an edge in the fundamentals game.

Another major problem, just look at how many fundamental factors there are to look at. Interest rates, money supply, various whims of Fed officials of various stature, threats and hints of bank intervention, employment numbers, balance of payments, purchasing power parity, revised numbers, political events (which has its own numerous subcategories), etc. Multiply that by the number of currencies you trade, and you can easily see just how tough it is to do this on your own, effectively. You have to:

a) Have fast access to this information.
b) Have the ability to parse the information quickly.
c) Have the knowledge and skill to interpret the information properly.

And as we all know, you can get that WRONG just as easily as a technical indicator.

For example, the past few months positive surprises in Non-Farm payrolls has been leading the market to sell the dollar. Then one day everyone decided to buy the dollar, because they felt that interest rates were going to go up. Now tell me, how could you have known that this was going to happen in advance? There are dozens of analysts, each with their own opinion of what the market is going to do based on the fundamentals. Do you go with what the majority says? Do you go with an analyst guru you like that makes good calls lately? What if they hit a bad streak?

The only way, in my view, to know what was going to happen is to watch what the price is doing and see that there’s some strong momentum moving the market. Juggling interest rates, money supply, and dovish/hawkish comments in the mix is a bit tough, in my view, and not easy to work in a disciplined manner.

As one trader told me, the ultimate edge for fundamental based trading is insider trading. To get to that level legally with the FX market, you have to throw a lot of resources and you’ll always have competition there doing just the same thing anyway.

Don’t get me wrong, I’m not against fundamentals at all. I just haven’t quite figured out how you can effectively integrate them in a profitable manner.