As far I understand, fundamental analysis is not only about understanding the fundamentals, it is also about understanding how long before the date are released the market made an estimation about it.
Which is where I need help. I take an example : ECB rate cut. Its announcement coincided with a drop down of EUR even though it’s good news for the european economy because the market anticipated this news. But when should I, as a trader, have anticipated that ? When the first rumors about the rate cut flowed through the medias ? But these are just rumors so I have to decide whether or not to go for it.
I think I’ll focus for some time on technical analysis because, as a newcomer, I am always late for fundamental analysis.
Start with technical analysis, then when you understand a system
slowly bring in fundamental analysis to the equation. Obviously you
will need to get to know some of the fundamentals early ie NFP, today,
etc. taking a look at a financial calendar, before trading, will help.
For me the equation is more like using fundamental analysis when you are willing to trade on a particular pair, once you can forecast and get an idea on how the trend is going to behave, then you can apply a technical analysis to support your moves.
Thx. T-rex, can you give me an idea on how much you anticipate news ? That was the point of my question. The calendar is a precious information but…
Do you work like that ? You make your own prediction and if the market’s prediction is lower, then you buy… same thing with sell.
Or are you more flexible than that ? Its’ quite challenging for me.
Let me ask you. I really want to know something.
I�m trying to understand how CPI indicator affects the tendency of a currency. For example England Bank is afraid (at this moment) because it could be lower than in latest years. That means they will try to reduce interest rates to reduce also the CPI. So GPBUSD pair will go down one more time and will continue going down if CPI does it also?
Basing trade ideas on fundamentals is pretty difficult in the short term. Most news events have been “baked” into the market well before it is released, which is why we sometimes see a “buy the rumor, sell the news” scenario play out. For the most part, the resulting price action after a news event is released just causes a bit more noise, unless its a high tier event like NFP and/or if the actual is way off of expectations. If it’s neither a major event or a surprise, we often see the market return to pre-announcement levels.
In my humble opinion, fundamental based decisions is better for the longer time frames, but it’s great to be aware of the fundies in the shorter time frames as well to avoid unnecessary event risk. Also be aware of the market environment and sentiment as it often dominates over technicals and fundamentals in price action (the current market crisis and deleveraging is a great example of sentiment).
I am actually more flexible when it comes to news and this whole matter of fundamental analysis, as FXdude wisely said some of the most important news are �baked� before they are released and the impact can be predictable sometimes, so I believe that what everyone needs when using the fundamental analysis is to develop a criteria so you can trade on long term using the news to forecast the trend on a determined pair and probably using technical analysis when scalping or just using small time frames.
I’m not sure yet but I think I might be turning into a Technical Trader, I was always very in favor of the Fundamental Analysis, but honestly lately it has not done me any good. Technical analysis on the other hand, is giving me a lot of profits, now that I’m so into it I’m learning how to interpret my charts and most of the times I’ve been prepared to place orders at the appropriate time. We’ll see what’s coming anyways.
Well daydreamer, I want to thank you because before your posts I did not even know about such indicator, but it seems that is all about inflation and it basically gives you a near term inflationary outlook. Good to know, I will investigate further on this. Thanks.
This is a critical moment in the market due to the ongoing economic crisis. Almost every day the news important centers are releasing reports about interest rates cuts in eurozone and England and US data of production index and other stuff. That�s why I was so interested. Trading now is fundamental. But I notice when the market is calmer and more stable technical analysis is better to place orders because fundamentals as you say may take time to show results.
Well, being informed comes always handy, right? I always try to keep up on fundamentals but never fully rely on the effect that they will supposedly have on the markets as it is not that accurate, as simple as Forex is a market that�s ruled by human emotions and expectations, and we all know humans are neither easily quantifiable nor predictable, investor will rarely react the way it is expected.
You�re right�fundamentals give you a chance to get pips in charts but it�s better in that cases be monitoring the trades you placed as you said human behavior isn�t predictable and investors are different to governments actions or banks efforts to control economy. They react to charts and others expectations, not reliable.
In order to be more profitable we can use both technical and fundamental analysis. A recent study has been made about it and it found some interesting facts.
I think this is something a good trader must be able to do.
actually you�re talking about strategies. Strategies involve indicators and facts coming from technical analysis but it may be also supported by news and facts coming from fundamental analysis. Then, you�ll manage that particular strategy and you need to keep informed about currently news and how indicators behave
I guess that’s something well known by every trader, combining both analysis is the best strategy even though technical gives more results than fundamental. It’s just matter of understanding the numbers on each analysis.
Mmmm I agree both analysis are important but I think Technical is the one requires you more knowledge and time so first at all it is necessary to have good bases on that to make fundamentals work. Most of the people are more interested on the technical.
