How important are fundamentals?

This is a discussion on How important are fundamentals? within the Economic & Fundamental Analysis forums, part of the Methods category; Would you say that you guys trade the news or make a desicion based upon the news/events for upcoming trades ...

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Old Jan 6, 2017, 8:56pm   #1
Joined Apr 2016
How important are fundamentals?

Would you say that you guys trade the news or make a desicion based upon the news/events for upcoming trades or perhaps maybe you take fundamental information and stay away from a particular currency . ? I just trade based on technical analysis and very good risk management strategy ,lately ive been thinking i should be a little more involved in fundamentals. However at the same time i always think to my self that I should just keep doing what im doing because at the end of the day news/events can go the opposite direction as you would think to take on the market , in my opinion the market goes in you're favor or not so risk management is all there really is . thank you guys
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Old Jan 9, 2017, 3:59pm   #2
Joined Dec 2004
It's important to differentiate between news and fundamentals. They are related, but news is a short term thing while fundamentals deals with longer-term, bigger picture factors.
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Old Jan 9, 2017, 5:09pm   #3
Joined Jul 2008
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Originally Posted by italianlion View Post
Would you say that you guys trade the news or make a desicion based upon the news/events for upcoming trades or perhaps maybe you take fundamental information and stay away from a particular currency . ? I just trade based on technical analysis and very good risk management strategy ,lately ive been thinking i should be a little more involved in fundamentals. However at the same time i always think to my self that I should just keep doing what im doing because at the end of the day news/events can go the opposite direction as you would think to take on the market , in my opinion the market goes in you're favor or not so risk management is all there really is . thank you guys
I trade only off fundamentals and economic news. Sometimes I trade off news that affects the economy but is in itself unrelated. If you want to improve your trading then this is a very good option. The reasons sometimes it goes in the opposite direction can be attributed to either the details of the data (say nfp increases but only temporary jobs make up the bulk), the data isn't as good as expected, or some other news has an overriding influence.

To be blunt, it is a lot of work to do it properly. You can't just look for a news release and trade it. You have to know what is happening in the economies of both currencies. To do that you need to know what central banks are doing\watching, how the economy has been going, how any given data point could affect central bank policy or sentiment. I told another trader on a different thread that most people are too lazy to do the groundwork and prefer to stick to charts. What I can say is if you are prepared to make the effort, then you will be immensely rewarded.
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Old Jan 10, 2017, 12:29am   #4
Joined May 2016
Forker - are there any good sources that can guide a beginner fundamental trader, any books or websites or is it mostly on the job training? Basically where does one begin? Tks.
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Old Jan 10, 2017, 8:40am   #5
Joined Jul 2008
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Originally Posted by Signalcalc View Post
Forker - are there any good sources that can guide a beginner fundamental trader, any books or websites or is it mostly on the job training? Basically where does one begin? Tks.
The following updated series will help you digest some important indicators. You will find that with some economies you will need to find alternatives because they don't all have the same indicators and sometimes are named differently.

https://www.amazon.co.uk/gp/aw/d/013...mic+indicators

It will also help getting books on how economies work. Amazon has many titles in this area.

Get to know central banks, keep track of members speeches and digest monthly statements. These statements are key to everything. Central banks don't like surprising markets (most of them at least) and always gives clues to their planned moves and tell you what they are watching.

Use free services like forexlive and fx Street to gain analyst insight. Use tradingeconomics to access historical economic data to back research. You will need a real-time news service to give you access to economic releases instantly (text terminals faster than squark services. I use reuters eikon for $99 a month and it gives you a ton of premium data)

The process takes time to learn. It took me 3 years to be able to trade off just fundamentals but you can mix in with technicals. The process is as follows

1) get to know all the economies you are trading. I can't stress how important this is because it's key to pairing the strong against the weaker.
2) trade deviations in economic releases. Here you are looking to take advantage of releases that come out better or worse than expected. The great the deviation, the better the trade.
3) trade commodity currencies like cad using their respective commodity economic data (inventory)
4) plan your week ahead and each day. Know what data you can trade and how you would trade it either way.


It takes time to do this and at first you will feel somewhat lost. Just do your research and keep track of market sentiment and trade ideas will start flowing. Be warned that mixing with technicals you will often get conflicting signals so you will need to gain experience in dealing with these. It's actually one of the major reasons I dropped technicals because the economic data was always more reliable.

It gets easier I promise, once you get a handle on your process and your notes are a quick reference, you will be nailing it
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Old Jan 10, 2017, 12:58pm   #6
Joined May 2016
Brilliant thanks Forker and in your experience what kind of performance is your trading 'system' providing in terms of max drawdown and returns, win/loss ratio.

Do you still use any technicals at all or is it now all pure fundamental trading and investing.
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Old Jan 10, 2017, 2:50pm   #7
Joined Jul 2008
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Brilliant thanks Forker and in your experience what kind of performance is your trading 'system' providing in terms of max drawdown and returns, win/loss ratio.

Do you still use any technicals at all or is it now all pure fundamental trading and investing.
To give a reflection of things over the last 6 months in my intraday account, I have taken 45 trades of which 8 were losing trades with a max drawdown of 1.84% and an account has grown 51% (91% for the entire year). The biggest run of consecutive winners is 8 and my last losing trade was on 2016/12/07. I don't use any technical analysis and if i did i would have more losing trades due to the nature of technical setups. I have 2 accounts, the first is the intraday account using 10:1 leverage and the second is a long term account (positions 3-12 months) with 1:1 leverage.

Reasons for losing trades in the last 6 months:

5 of the trades were improperly paired trades (this is my biggest issue at the moment and its largely attributed the a divergence in the fundemantal position in the economy and market sentiment. This is my main area of focus to improve)
3 of the trades were caused by oversight of data i didn't see (doesn't happen often)
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Old Jan 10, 2017, 11:14pm   #8
Joined May 2016
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To give a reflection of things over the last 6 months in my intraday account, I have taken 45 trades of which 8 were losing trades with a max drawdown of 1.84% and an account has grown 51% (91% for the entire year). The biggest run of consecutive winners is 8 and my last losing trade was on 2016/12/07. I don't use any technical analysis and if i did i would have more losing trades due to the nature of technical setups. I have 2 accounts, the first is the intraday account using 10:1 leverage and the second is a long term account (positions 3-12 months) with 1:1 leverage.



Reasons for losing trades in the last 6 months:



5 of the trades were improperly paired trades (this is my biggest issue at the moment and its largely attributed the a divergence in the fundemantal position in the economy and market sentiment. This is my main area of focus to improve)

3 of the trades were caused by oversight of data i didn't see (doesn't happen often)


Thanks for sharing some details, think I'll do some research and give it a try.
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