Trading Fundamental Analysis Initial
Trading Fundamental Analysis are introduced with Forex main indicators are in this section if you need to be successful in it refer this Forex fundamentals.
End of this section you will, you will understand what market sentiment is and how it can affect prices. You will learn how to go about trading the fundamentals, you will learn how to predict the possible results of some fundamentals using correlation. You will learn one of the major keys to successful trading and how you can use this key to make more money trading Forex.
- Reasons for move – First identify the cause of move using the news sources, is it because of an economic announcement, rising oil prices etc.
- Fundamentals – Identify the overall fundamental picture of that currency, use the news sources to find out what the central bank is focusing on and which way the currency should be going.
- Fair price fair value – What is the fair price of the currency based on the cause of the move and the fundamentals
- Sentiment – The mood of the market, very often the fundamental may point towards the market moves down this is often just a change in sentiment and is temporary
- Sentiment change may be caused by traders taking profits and as a result we see a temporary change in the direction of the market we see a temporary change in the direction of the market but as long as the fundamentals remain unchanged the market will eventually go in the direction of the fundamentals.
so, whenever you’re trading and using fundamental analysis, you should always aim to figure out the fundamental Reason for the move. Now, what I mean by this is, say for example, we have a fall into Euro USD, your aim should always be to figure out what changed fundamentally to cause the Euro USD to fall. So for example, maybe the US raised interest rates, or maybe there was news that indicated that the US would raise interest rates, or maybe great news came out for the US, maybe us add a great job report this month, maybe the US ad grade fundamentals, maybe some great fundamental news came up for the US. So, all of these would cause the Euro to fall and the US to rise. So, you should always try to find out the fundamental reason for the move. So, first, identify the cause of move using new sources. Is it because of an economic announcement, right? Prices etc.
Fundamentals no identified the overall fundamental picture of that currency, use a new source of figuring out what the central bank is focusing on and which way the currency should be going. So, as I said before, always try to understand fundamental picture of the currency. What are the central bank’s perspectives on the state of the economy? Are they moving towards raising interest rate? Are they moving towards lower interest rate? What are the focus? Are they focusing on starting a QE program? What are they focusing on? Figo, they focus and there’s also fear price value, what is the fear price of the currency based on the cause of the move on the fundamentals? So, say for example, the Euro is at a value and the news came out that caused the Euro to rally. Now if the news came out cause you to rally let’s say to you rally to 1.1 zeros. You know, if no other news comes out and we see the US, the Euro us begins to fall with no change in fundamental picture, then we can say the fair price and fair value for the Euro USD is 1.100, because that’s the price that it went to after the fundamental picture changed. So, if the fundamental picture is still the same, then the fear price of the Euro USD is still the same. No sentiment, no. sentiment refers to the mood of the market. So, for example, you may observe the fundamental pitch for the market to be positive and you may observe the market doing the opposite of that. Say, for example, the fundamental picture for the Aussie USD is good.
We have good jobs report, there’s growing employment and stuff like that, and you begin to see the other USD fallen. No, this fall in chances are is due to sentiment is just temporary and is due to sentiment. So, market moves that are caused by sentiment are temporary. No sentiment change may be caused by trade is taking profits. And as a result, we see a temporary change in the direction of the market. But as I said before, if the fundamentals remain unchanged, the market will eventually go in the direction of the fundamentals. Now, in the next lecture we be looking at fundamental correlation we’ve been starting with the PPI that is the producers Price Index.
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