Forex training – Fundamental analysis and how to apply it to trading

Although the vast majority of a particular Forex trader’s trading decisions are based on technical analysis they learnt during Forex training, 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 Forex trading strategies 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 Forex trading strategies or systems which complement 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 training and you should be able to use it to your advantage.