How to trade based on Fundamentals?

Discussion in 'Forex - Currencies Forums' started by BerndFoll, Jun 15, 2015.

  1. BerndFoll

    BerndFoll Well-Known Member

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    Here I am about to describe how I use fundamentals we get from forex calendar in my trading and how we can take advantage of news releases every week.

    Probably all know about forex calendar and news so I am not gonna explain that in details, my aim here is to let people know how to trade fundamentals, what to look for and when exactly trade them.

    So far I am not the most successful news trader definitely, I have some mistakes on regular basis but I am learning this and sometimes I can actually get some lovely pips from news releases.

    First rule in news trading I’ve noticed and come up with: Do not speculate on pre-news because believe me there are many investors who do that and in case you are wrong on speculation, it is hard to get out of that trade in case there is surprise in that release to opposite direction.

    Second what we should notice: Always look for release, do not trade it if you do not get any surprise at all, for example if Manufacturing PMI for pound was expected at 49.2 and it came at 49.2 look for market reaction, but likely there will be no at all mostly, so you might not want to be in that trade too.

    If you trade one release like I mentioned the same manufacturing PMI, you should definitely pay attention to previous releases over at least 1-2 weeks period for pound because if there is down trend, bad releases, then market is likely to punish pound if there is even slight miss in that release.

    I know many traders might ask what to do if there are like 10 releases for euro, what to know what we should trade, and what not.

    First definitely look at which are more important, clearly French unemployment data will be less important than whole Eurozone data, so do not expect much of an action after first releases, wait for final numbers, wait for most important releases to come out. I’ve came up with losing trades only because I jumped in trade after market moved about 20 pips after release, but later we got more important release at much better numbers and obviously market gave up that dip and went even further up, I ended up with losing trade.

    One great way how to trade news release is open 5 min chart on that pair you are looking to trade, wait for release and then look at chart, wait for 5 min candle to close, it will show you strength after that release and that could be very nice pointer of direction where that pair might head later. However this is important to understand that not always market keeps that strength or weakness, sometimes market is uncertain and then it is wise to use very tight stop loss to avoid any surprises.

    About the take profit and stop loss targets. Stop loss for news trading should be tight, do not use like 50-60 pip stop loss, which is waste of money, no more than 30 pips I say. If you do not get any surprise in release, do not trade it because then market might be choppy and you might even lose that trade. However take profit target is where your technical analysis must step in, look at chart, look for any price points where market might find them hard to break, that is your first target. I am saying from my experience that about 100 pips that is maximum you might get from release in one day and that is only when volatility is extremely high, otherwise maybe 50 up to 80 pips on average basis could be good.

    One big aspect we have in forex is all the meeting minutes, rate decisions, press conferences. This is which is most difficult part in forex, sometimes market can be very aggressive and volatile and extremely unpredictable too. I can’t explain exactly how to trade each press conference or mpc minutes right now, there I hope I can spend some time writing how to do best on some of these speeches if some members will want to know more [​IMG]

    Right now that is all information I can share from theory, but if there are traders who really want to know more, I would be willing to explain more in details here because we have to take news releases and look at them separately, then that idea might be clearer to others [​IMG]

    Looking forward to questions and some qualitative advices, opinions only! [​IMG]
     
    Last edited by a moderator: Jul 8, 2016
  2. radex78

    radex78 Senior Investor

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    One of news that often influenced to the market quickly is about non farm payroll, like as on this last week on friday market because news nfp usually in schedule economy will released on beginning month first week on friday, after news nfp was released then we can look on several pair like as gbpusd, eurusd, usdjpy and also usdchf in large movement, trader that based on fundamental analysis I think they also already familiar with news nfp.
     
  3. Liam

    Liam Member

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    Thankyou,i was looking for same info since so long!!
     
  4. Corzhens

    Corzhens Senior Investor

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    This thread reminds me of a former colleague who used to dabble in forex on a personal capacity. She tried her best to learn the trade while still employed in the bank. When she had learned the technique, she put up her own money changing business particularly centered on US dollar. That was in 1985 and until now she still have that business dealing in foreign exchange - US dollar, Euro, Pounds.
     
  5. kgord

    kgord Senior Investor

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    I am totally confused by Forex and binary trading options. I understand there are platforms that require minimum deposits and so forth, and some companies alllow you to have a demo trading account and so forth...but beyond that...I really don;t know anything about it? Why do people like these methods of trading?
     
  6. Liam

    Liam Member

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    I was not aware of this,,informative post by BerndFoll.
     
  7. anders

    anders Well-Known Member

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    People use day-trading platforms because it is a form of "leveraged" trading, meaning that you can use a smaller initial outlay of money to "win big" if the trade goes in your direction. Obviously, this also means that you can "lose big" if it goes against you. As far as I know, most FOREX-like platforms are based on this same principle.

    It's been discussed a lot lately here about the inherent risks that day-trading poses, so I won't go over these, but as the thread is about "fundamental" analysis I'll just say one thing: some of the biggest trading firms hire a lot of smart people to do rigorous profiling of various stocks, and even they get things wrong (quite often, actually). There's this assumption sometimes that the opposite of "technical" trading - of which day-trading is really all about - is "fundamental". It's not that simple. Warren Buffett aside, fundamental analysis is time intensive and still pretty risky, for different reasons. I'll be interested to see other people's opinions on this. I could be wrong.
     
  8. JulianWilliams

    JulianWilliams Well-Known Member

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    It's not like trading only based the fundamentals is a fail safe method and I'm not sure it's even the best method. I personally prefer to take occasional punts based on news I think will soon fill the media and make everyone move one way or the other.
     
  9. Benoit W

    Benoit W Well-Known Member

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    Stосks аnd indеxеs саn bе influеnсеd by сhаngеs in сurrеnсy lеvеls, but mоrе оftеn thаn nоt thеy suссumb tо nеws thаt rеlаtеs spесifiсаlly tо thеm. А primе еxаmplе wоuld bе thе nеw prоduсt аnnоunсеmеnts оr еаrnings rеpоrts оf Аpplе. Lаunсhеs оf nеw prоduсts оr thе shаring оf thе prоspесts оf thе соmpаny соmmаnd thе аttеntiоn nоt оnly оf thеir сliеnts, but аlsо оf invеstоrs аnd trаdеrs. Thе lаst prоduсt lаunсh wаs lаrgеly wеll rесеivеd by thе fаns оf thе соmpаny whо rеgistеrеd rесоrd оrdеrs fоr thе nеw iPhоnе, but invеstоrs wеrе lаrgеly unimprеssеd аnd lеft thе priсе оf thе stосk аt thе sаmе lеvеl.
     
    Last edited by a moderator: Jul 8, 2016
  10. remnant

    remnant Well-Known Member

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    Like many other areas in life, the best thing to do in forex trade is not to put your eggs in one basket. The ultimate rule of the thumb is diversification. This means that you spread your stocks in different well thought out portfolios. This is the mechanism of spreading the risk. Some stocks are bound to rise while others will fall. In the medium term a trader should be able to realize a profit as he or she learns more tricks and nuances of the stock exchange. A central depository account is necessary to seamlessly run the different portfolios.
     

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