Hi everybody,
I am Jason from Singapore, I have a few question regarding fundamentals.
I have came across this article on the FXtrader magazine on my iPhone app on the latest issue, I quoted this;
“But when
I sit down at my computer, I’m
100% a technical trader. I don’t care
whether everybody else in the world
says that the European Central
Bank is going to raise interest rates.
If my charts are telling me that I
need to be long or short, that’s what
I’m going to do. I know several
fundamental analysis traders, I’m not
suggesting by any means that you can’t
be successul as a fundamental trader,
but what I can tell you is that every
fundamental trader that I know has
a team of people that do nothing all
day long but research. But if you’re
an individual trader, working from
home, not only do you not have
access to the information that you
need in order to make an intelligent
decision, but even if you did, you
couldn’t go through it all. There is
no possible way, in my opinion, for
a private trader who doesn’t have a
team of people, to make educated
decisions based on fundamentals.
So what we do is that we eliminate
all that subjectivity and we focus
exclusively on technical analysis.”
Jason Stapleton. 4TH position at Varengold trading challenge
Source: FXTraderMagazine
Google search: varengold trading challenge jason
I am very confused. I have read babypips school and I know that fundamental plays a huge part in FX trading. But the quote of the article above explains that fundamental needs a group of people doing research and it is not suitable for ‘‘small guy’’ retail trader like myself. Is there a right or wrong answer? or is it both right?
I need some advise from all the fundamentalist, Please enlighten me.
An individual trader can most definitely use fundamental analysis. Does it require work? Absolutely. Does it require a team? No.
The reality is, though, that fundamental trading is longer-term in duration, so you have time to keep up with developments. You don’t have to make day to day decisions.
ok I get your point. I love swing trading.
But the article did mentioned that good fundamental infos to make intelligent decisions are not easily accessible by small guy like me. thats not true right?
Nope. Not true at all. In the currency market the influential fundamental information is all macro level stuff which you can track by following the data releases (all public) and news developments. From there it’s all your own ability to turn it into a useful hypothesis.
That said, as a swing trader you’re likely not going to find fundamentals all that useful on a trade-by-trade basis, though they could help you bias your positions with a longer-term view.
ok, I am at the stage of planning my trade now, I’m deciding whether Tech or Fund analysis is more suitable for me ,or both.
But now, After knowing that retail traders can get the news fundamentals efficiently and making the right trade, Im much clearer.
After getting information from you all, i have a conclusion.
-I am a short term swing trader, according to babypips school, i am between intraday trading and long term trading.
-I am using 240mins chart.
-I study News and datas that will help me maximize profit and minimize lost.
-Once I have the News and datas, I look for entry signals using technical analysis.
-My stops are 100 to 200pips while my profit is from 200pips to 300pips.
-I only risk 4% of my whole account balance in one trade.
-If I miss the boat, don’t force trade, wait for the next one.
I will only look at the chart when I receive notification in my email saying that my positions have been closed(either TP or SL).
-I will look at the chart twice a day to look for opportunities.
Think like a Fundamentalist, Trade like a Technician.
But…What kind of news or data will drive the price to a movement of more than 200pips(long term ones like the Recent Greece crisis)? I study babypips, the news release in everyday news reports makes the price volatile of up to just 50pips per round for a few minutes or seconds, but that’s intraday.
Recently in I attended Kathy Lien’s seminar in Singapore and that inspired me to be a trader, she’s very good at fundamentals, Im impressed by her. but at the same time, Jason Stapleton(the full technical guy) too. So I’m gonna mix abit of both.
Her latest book:
<Day trading and swing trading the currency market> But that was published in 2008(its 2 years old already), anyone bought that book? is it good?
1.First Part, You are explaining that; according to the news calendar, different News are graded with different colors depending on their Impact on the market. If the news turned out the be the same as predicted, the market will not move that significantly. How did the website get all the calendar dates, news Impact and the prediction? Is there a way not to lookup for the calendar and be independent?
2.Yes, thats right, Im looking for News that will have lasting effect on the market! You mentioned the interest Rates, I’ll do research on the others.
3.Last part, is this a sample to fundamental analysis? Thats great, I’ve learn abit from this, Thanks!
I still need to get it clear whether can i make it through the first part.
Looking forward to your reply!
Thanks
What you mean is that, Macro is more for longer term trading and the news that drives them is, eg interest rates. But I will be using 4 hour charts and my profit level is 200-300 pips, macro is still suitable for 4hour chart right?
oh btw have you seen my trading plan? what do you think?
I can accept anything:)
I pretty much agree with the article. The thing with fundamental analysis is that a whole lot of it is guessing how a pair is going to move because of something else happening.
This means you have to not only know all the variables that might impact the pair, but have to make a judgment call on what the effect will be.
Sure there are the obvious variable like interest rates and economic collapses, but even those often can cause unexpected moves.
Myself, I just check out forexfactory around entries and avoid news entries. TA holds up good enough for me on daily and above time frames.
In any event FA & TA aren’t meant to be used as a crystal ball that says, “price will definately do this.” At best they are used to determine a trend or lack thereof and reasonable exits and stops.
IMO, as an at home trader, if you had to pick one that would be more reliable it would be TA on daily and up charts.
FA, is more a tool for long term investors who intend to stay in trade for months and even years.
Ok i understand what you are trying to say.
Macro example is the interest rates, more long term effects but micros will affect the price(for awhile) and then the macro will be back again. if macro and micro is both going the same direction, it will move at a faster rate.
Daily news does affects the 240mins chart but not long after the main macro steps in.
I have a new question.
I just bought Kathy Lien’s Ebook online and there is one part that I dont understand. Can you help me break it down? Thanks
’’ Traders exposed to Japanese equities also need to be aware of the developments
that are occurring in the U.S. dollar and how they affect the
Nikkei rally. Japan has recently come out of 10 years of stagnation. During
this time, U.S. mutual funds and hedge funds were grossly underweight
Japanese equities. When the economy began to rebound, these
funds rushed in to make changes to their portfolios for fear of missing
a great opportunity to take advantage of Japan’s recovery. [B][I]Hedge funds
borrowed a lot of dollars in order to pay for increased exposure, but the
problem was that their borrowings are very sensitive to U.S. interest rates
and the Federal Reserve’s monetary policy tightening cycle. Increased borrowing
costs for the dollar could derail the Nikkei’s rally because higher
rates will raise the dollar’s financing costs. Yet with the huge current account
deficit, the Fed might need to continue raising rates to increase the
attractiveness of dollar-denominated assets[/I][/B]. Therefore, continual rate hikes coupled with slowing growth in Japan may make it less profitable
for funds to be overleveraged and overly exposed to Japanese stocks. As a
result, how the U.S. dollar moves also plays a role in the future direction of
the Nikkei.’’
I dont understand the bolded sentence.
Funds borrow huge amount of USD to invest in Japanese equities and huge borrowing triggers the FED monetary policy tightening cycle which resulted in rising the borrowing costs. [U]Increased borrowing costs could derail the Nikkei’s rally because higher rates will raise the dollar’s financing cost. [/U]
I understand the reason, but don’t know how does it work, how does it affects the Nikkei.
Do you have any idea how forexfactory or baby pips got the info on all the events on the calendar? Did they flips the papers? or is it simply inside info? They event got the expected outcome of the events and news…
because I want to be independent instead of looking up for the calendars.
Honestly, I have no idea where they get their info. I’m sure it’s nothing you couldn’t do for yourself.
Having everything listed at FF is more of a convienance. I know I wouldn’t want to have to spend hours scouting out news from every currencies country involved in the pairs I watch.
But, try this. Watch pairs with upcoming news and watch how they behave according to the news releases. You’ll see that FF is pretty much spot on.
Around the news you’ll usually see some spike and irratic movement then it will calm down and pick a direction.
Not sure I agree with Kathy’s “borrowed huge amounts of dollars” analysis, but what she’s saying is that if investors who did borrow dollars saw the interest rates on that debt rise, increasing their expenses, they may be less inclined to hold their Japanese stock positions. Additionally, if higher interest rates were to cause the dollar to rally (very reasonable) then that would actually devalue their Japanese stock holdings.
If a group of investors borrows a lot of money in dollars to invest in Japanese stocks they have 3 risks.
Interest rates - If the investors have not borrowed at fixed rates then if USD interest rates rise their cost of funding their stock purchases goes up, making their return lower.
Currency Exchange rate - If the yen depreciates against the dollar (USD/JPY rises) it means the value of the stock investment falls. For example, if you buy $1m worth of stock when USD/JPY is at 100 (meaning JPY100m), if USD/JPY goes to 110 your stock is now only worth $909,091. You’ve lost nearly 10%.
Stock prices - If the value of the Japanese stocks fall, then obviously they lose money.
So, to the point I was making before, if US interest rates rise it could make those who borrow dollars to buy Japanese stocks take a double hit by their cost of funding going up (#1) and the dollar appreciating (#2).