This Forex training article focuses on the importance of using fundamentals in your forex trading.
Although the vast majority of a
particular Forex traders trading decisions are based on technical analysis,
some traders pay attention to fundamental factors which can have a major effect
on any open positions they may have or on those that are planned for entry.
The reason for placing more emphasis on technical analysis is that whatever
comes out in the news will be reflected in the charts. Having said that, by knowing in advance that
some market moving news such as NFP (non-farm payroll) is due out at a specific
time, traders can adjust their trades accordingly. Overall, it pays to be a bit
more strategic sometimes in order to get that little bit more out of your
trades. Similarly, if you are trading in small time-frames such as the 5 minute
time frame and you are leaving your trade to run overnight, think twice if news
is coming out on the currency pair in your trade.
Other traders who trade based on
fundamental analysis do so because they believe that even though short-term
market movements are random and sometimes erratic, eventually in the long term the
currency pair will appreciate or decrease in value, based on what the
fundamentals are indicating. However,
one of traders main pet peeves with pure fundamentalist is the idea that
fundamental analysis alone will explain the when, how, where element of price
action and movements in the market. This could not be further from the truth. Most
traders discover over the years that the perceived impacts of fundamental
factors are not always shown in the market (at least not immediately) as the
market will sometimes price in certain factors before them.
Given the plethora of ways we
could all use to analyse the market, every Forex trader must choose one that
fit his/he personality, find a method or system which complements the chosen
form of analysis and simply apply risk management and money management with a
strict level of discipline in order to achieve optimal trading results.
Considering that the likes of Warren Buffett, George Soros and many other super
traders have trading styles which are not exactly the same. One might say that
it is only by applying appropriate position sizing and the right discipline
that newbie traders can see above average trading results. Even though you may
use fundamentals in a different manner to each other, you need to make sure
that they suit your style of trading. Use what have learnt in your Forex
trading course and you should be able to use it to your advantage.
