How to Conduct Fundamental Analysis

Conducting fundamental analysis in Forex trading is easy. All you have to do is watch the news really, however, how you carry out your fundamental analysis will depend on your Forex trading strategy. If you have a long-term Forex trading strategy, for example if you are a carry trader, you will want to try and predict the futures of the economies of the currencies you are trading. However, if you are more of a short-term Forex trader, for example you might use a short-term news trading strategy, you will want to focus more on individual news releases. Whatever your currency trading strategy is, in order to conduct fundamental analysis, you need to focus on the main indicators in fundamental analysis, which are: interest rates, gross domestic product (GDP), trade balances, rate of employment and rate of inflation. You need to consider all of the above indicators, if you want to conduct good and profitable fundamental analysis. You might even want to consider focusing on one single indicator in particular. For example, if you are a short-term news trader who trades the United States dollar, you might focus on the rate of employment in the US. In this case, you would most likely focus on the NFP (nonfarm payroll), which is also known as “the job report”. This news release is published every month, which presents a good monthly opportunity to profit. There are endless opportunities though, when it comes to fundamental analysis. Whether you use a short-term Forex trading strategy or a long-term one, you can make use of fundamental analysis in Forex trading and deduce lots of profits....

Whether Fundamental Analysis is More Effective in the Short Run or Long Run

There is some debate about whether fundamental analysis is more effective in the short run or long run. Generally, this type of analysis is thought to be more effective in the long-term, but this doesn’t necessarily mean that it can’t allow Forex traders to also spot short-term opportunities and make faster profits in the market for currencies. Fundamental analysis is all about studying the news; this means that fundamental traders will look at both key economic data as well as political news, broadcasts and announcements. Most news releases can affect the prices of currency pairs in the Forex market. Many fundamental traders focus on long-term profits, by predicting how a particular economy will turn out, relative to another economy. For example, if a Forex trader thought that the US economy would improve dramatically over one year and in the same year they thought that the UK economy would do badly, they would consider buying the USD/GBP currency pair. This is because they feel that the US dollar will go up in value and the British pound will go down in value. If a fundamental Forex trader wanted to make more short-term profits though, they might predict that the next, upcoming US nonfarm payroll (AKA the job report) would bring out record highs, so they might then consider buying the US dollar before its release and then sell shortly after its release, when the demand for USD increases. The main reason why most fundamental Forex traders focus on long-term profits, is that news trading strategies are thought to be safer when used in the long run, rather than in the...

Forex Trading News

News in Forex trading is very important. It doesn’t matter what your Forex trading strategy is; you can benefit from keeping up-to-date with all the latest news that is relevant to the currency pair (or pairs) that you are trading, regardless of the strategy you use when trading currencies. Every Forex trader should conduct fundamental analysis, even if they prefer and are better at conducting technical analysis. Both of the main types of analysis in currency trading compliment each other and if you only carry out one type of analysis, you are essentially trading currencies half-blind. Fundamental analysis is just as important as technical analysis. Even if you aren’t keen on fundamentals, you should still carry some fundamental Forex trading analysis out no matter what, because it doesn’t have to be difficult nor does it have to be time-consuming. By just checking up on the news, you are technically carrying out fundamental analysis. As long as you interpret the news well and take it into account when trading your currency pairs, you will stand much more of a chance of succeeding and making profits, in the Forex market. Forex trading news is one of the most important parts of fundamental analysis, when trading currencies. Remember, you don’t have to buy a newspaper or signup to a paid newsletter subscription in order to get the information you need; there are plenty of online news mediums available to you. The majority of online news sites are completely free and are updated very promptly, allowing you to keep up-to-date with all news related to the currency market. Remember, you should consider world...

How Fundamental Analysis Can Fail

Although fundamental analysis is very popular, it can still fail if it is carried out poorly, improperly and ineffectively. It can be very powerful and profitable, if it is conducted well, though. Although many Forex traders think that fundamental analysis is just about trading the news, it is not. You do of course trade with news releases when trying to take advantage of this type of analysis, but you don’t just ignore all the other factors that come into play too. You have to make your own judgement on the news releases that you watch and the various other information (related to the fundamental indicators) that you discover; you need to assess how the rest of the market will take both the news releases that you watch and the other various information that you discover, because they might not collectively take in the same information exactly as you will. This is similar to stock trading, where you don’t simply predict the future of a stock’s value by assessing how well the company will do in the future; a stock’s future value is determined by market forces which are caused by mass psychology. Fundamental analysis is all about predicting what the rest of the currency market’s traders and investors will react to news releases and such. Again, the FX market is just like the stock market in this sense; even if a company does exceedingly well, its stock value won’t necessarily increase – its value depends more on the amount of hope that the stock market has for the company. The markets are about mass psychology and even if a...

Indicators in Fundamental Analysis

Fundamental analysis one of two types of analysis conducted by traders and investors in the Forex market. The other type of analysis conducted by Forex traders is known as technical analysis. There are indicators in fundamental analysis, just like there are technical indicators, however in fundamental analysis, the indicators tend to be referred to as non-technical indicators. Fundamental analysis helps Forex traders and investors, in predicting the price futures of currencies, by taking into account both political and economical factors of the countries of the currencies being analysed. Once you conduct your analysis, you can then use it to make more educated decisions and place potentially more profitable orders. The main indicators in fundamental analysis are: – Interest rates – Gross domestic product (GDP) – Trade balances – Rate of employment – Rate of inflation. Interest rates tend to be the most important factor, when it comes to fundamental analysis. Interest rates directly affect the values of currencies. Different countries will of course have different interest rates. If a country raises its interest rates, then that country’s currency should increase in price, as investors will find the higher interest rates as more appealing. These foreign investments can come from anywhere. Interest rates should not be underestimated. The gross domestic product, or GDP, of a country is also an important factor. Countries release their GDP results annually. Stronger GDP levels of countries will help to appreciate the values of the currencies from those countries. Similarly, if a country releases a lower GDP level, their currency will most likely suffer and devalue. Trade balances measure the differences between the annual volumes...

The Weaknesses of Fundamental Analysis

Fundamental analysis is all about the psychology of the Forex market. It helps Forex traders and investors to predict market forces in the currency market. Fundamental analysis tends to be easier to conduct than technical analysis, as it is based more on logic. It is also easy to conduct this type of analysis, due to the high availability of news and other various types of fundamental information, on the internet.┬áBut it can be difficult to trade with fundamental analysis, despite the fact that this type of analysis is easy to conduct; fundamental analysis bears a number of weaknesses. One weakness of fundamental analysis, acts as an advantage when conducting this type of analysis. Due to the easy access of fundamental information on the internet, Forex traders and investors can find news stories and such, with great speed. This means that the majority of news stories get discounted very quickly and before you know it, the FX market has already started to look to the future. This means that you have to act extremely fast to even stand a chance of benefiting and profiting from the majority of news stories. Many years ago this wouldn’t have been the case, with the absence of the internet and the online mass media outlets. Unfortunately though, Forex traders and investors now struggle to take advantage of most fundamental news releases. It is important to note that the volatility of the Forex market has increased over the years. This increased market volatility weakens fundamental analysis and its effectiveness in Forex trading, as it means that individual news stories can no longer be traded with....