Learn About Forex Fundamentals and How to Trade Market Moving News Events
Fundamental Traders basically trade the news. Trading The News or News Trading has the potential to be a profitable way to trade the Forex market. It must be noted, however, that a high level of risk is involved. You also need tools like the Secret News Weapon (SNW), because without it, you will almost certainly lose money news trading. Fundamental Traders analyze key economic data, including news and government reports, to evaluate trading opportunities. From the fundamentalist perspective, currency exchange rates are affected primarily by economic and political conditions, and occasionally by central banks intervening in the currency markets in an attempt to influence the value of their currencies. Some of the key figures tracked by fundamentalists include interest rates, inflation, trade balance, GDP (Gross Domestic Product), CPI (Consumer Price Index), PPI (Producer Price Index), capacity utilization, factory orders, durable goods orders, inventories, and employment statistics. Fundamentalists are also constantly evaluating the potential impact of military conflicts, natural disasters, and changes in political leadership.
So there are two types of traders; Fundamental Traders and Technical Traders.
Technical traders make their decisions using two primary tools: 1) Charting tools (trend lines, support and resistance levels, etc,) and 2) Quantitive Trading Models (mathematical analyses to identify trading opportunities). Whether using proprietary charts and/or models or those developed by third-party providers, the goal of a technical analyst is to study historical data or past behavior of the market in order to predict future market movements.
There is a whole art and science to Fundamental trading, or more commonly know as news trading. There are regular news events that get released on a regular basis like weekly, monthly, every 6 weeks (FOMC - Fed Interest rates). These are market moving events. Good news for one currency could be bad news for another. Many times the market already has an expectation, whether it be right or wrong, and for the most part has already been priced into the market. When an unexpected number comes out, that's when the currencies can go wild, and if you're on the right side of the trade you will make money. If you're on the wrong side of the trade, well, you guessed it. You just lost some money.
News trading is not black and white. A good number for the USD does not mean the USD will increase in value. It could do the opposite. So keep this in mind if you decide to be a fundamental trader vs. a technical trader. Fundamental traders have to keep up with the news on a continuous basis and they need to understand what those numbers mean. Every trader should know what financial news events are scheduled so they can make better trading decisions. One of the best News Calendars I know of and use daily is the one from ForexFactory. I can't teach you everything there is to know about fundamental trading, but there are services out there that can help you learn. Most of them are monthly fee based services that give you access to an online conference room where you and hundreds of other traders, trade together with the help of an expert news trader. I belong to one and we do quite well at times but with news trades, you will not trade every day. Some traders find this hard to do. They want to be in the market all the time so they technical trade.
The bottom line is to find the kind of trading that fits your lifestyle and stick with it. There are very successful fundamental and technical traders so there is no right and wrong way to go. Whatever works best for you is the one you should stick with..