fundamentals... where to even start

samills70

Junior member
40 1
Hey guys having been suckered into technicals a few years ago and promptly losing money like any other technical trader out there, I realise now fundamentals and central bank policies are the keys to successful trading. However, digging into fundamentals properly is a monumental task.

Anyone out there trading with fundamentals that has advice steps to approaching fundamentals correctly?
 

samills70

Junior member
40 1
If you wanted a fresh start with your binary options trading, I suggest that you find a broker like Optionstars that offers a demo account. You may have the opportunity to explore their platform for free and then you decide later on if you want to trade with them in a real money account or not.
Thank you Optionstars employee/owner for your useless empty pointless response to my thread. Don't take this the wrong way but you serve no purpose whatsoever. Go peddle your wares on someone else.
 
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tomorton

Legendary member
7,443 1,007
I do look at (analyses of) fundamentals but only to sense-check my TA. After that I'm trend-following: so the big money analyses the FA and I follow the footprints of their analysis. There's no point me having a unique opinion on the EUR/USD's prospects if nobody else agrees, as price won't move unless big money makes it.
 

dbphoenix

Legendary member
6,952 1,244
Hey guys having been suckered into technicals a few years ago and promptly losing money like any other technical trader out there, I realise now fundamentals and central bank policies are the keys to successful trading. However, digging into fundamentals properly is a monumental task.

Anyone out there trading with fundamentals that has advice steps to approaching fundamentals correctly?
Your profile says nothing about what you like to trade or would like to trade. If it's stocks, take a look at The Motley Fool (www.fool.com). Though you may not agree with the Gardners and their crew, they are thorough, and their investigations will provide you with a starting point.
 

Atilla

Legendary member
19,053 2,685
Hey guys having been suckered into technicals a few years ago and promptly losing money like any other technical trader out there, I realise now fundamentals and central bank policies are the keys to successful trading. However, digging into fundamentals properly is a monumental task.

Anyone out there trading with fundamentals that has advice steps to approaching fundamentals correctly?


Three things move the markets.

1. Fundamentals ultimately as all chickens come home to roost... eventually...
2. News
3. Technical Analysis - although some people ignore this altogether but if enough people act on signals it is like a self fulfilling prophecy. Without real data and news behind the event it can be difficult to determine. fwiw I do trade off some signals. Each to their own.

Markets are all related to each other as they all feed off each other. Some have positive and some inverse relationships.

So for starters, forex, commodities, bonds and shares, oil and gold are all linked along with interest rates and inflation.

You have a mountain to climb with many false peaks.

1. John Murphy's Intermarket Technical Analysis would be a good start imo followed by

2. An End to the Bull by Gary Norden


Good luck and hope you have deep pockets... (y)
 

samills70

Junior member
40 1
Tnx for the response guys. Yeah I believe that big money moves the market on news and key events but its always tricky to filter out the fundamentals that are just noise. Im trying to find a deeper understanding of fundamentals that will also cover the bond market etc. And yeah apologies I am talking about the fundamentals that pertain to the Forex market.
 

Atilla

Legendary member
19,053 2,685
Tnx for the response guys. Yeah I believe that big money moves the market on news and key events but its always tricky to filter out the fundamentals that are just noise. Im trying to find a deeper understanding of fundamentals that will also cover the bond market etc. And yeah apologies I am talking about the fundamentals that pertain to the Forex market.
John Murphy's Intermarket Technical Analysis is a a must for you then. (y)

Fixed Income, bonds market is a whole different kettle of fish however. Beware. Can't help thinking you're taking too much on.
 

samills70

Junior member
40 1
Tnx, I've just had a look at the overview on amazon. I think that's what I'd like however it was done in 1991. The forex market now looks absolutely nothing like it did then with QE programs and so forth. But yeah tnx I might try and give it a glance if I come across it... I'm into value things and at 66pounds for the kindle edition i might just give it a skip for now :) ... yowsers where did that price tag come from??
 

dbphoenix

Legendary member
6,952 1,244
Tnx for the response guys. Yeah I believe that big money moves the market on news and key events but its always tricky to filter out the fundamentals that are just noise. Im trying to find a deeper understanding of fundamentals that will also cover the bond market etc. And yeah apologies I am talking about the fundamentals that pertain to the Forex market.
If you're looking at fundamentals of the currency markets, think very carefully about whether or not this is really the course you want to take after all these years. Consider also why forex. If it's because forex appears to be cheap, cheap can become expensive very quickly, as all but a few forex traders eventually discover.

If you're truly interested in fundamental analysis, I suggest you focus on stocks. Stocks can also be "cheap", particularly as buyers may purchase odd lots. OTOH, if you're daytrading, you will likely have no more success with stocks than with anything else.
 

forker

Senior member
2,688 500
you are on the right path in your thinking of intermarket analysis alongside fundamentals. Before diving into economic data you need to have a firm grasp of the relationship between asset classes. By understanding this will help you avoid taking the wrong trades and give you a basis to make the right ones.

All markets are linked in some way. Interest rates for example influences equities. This week the anticipation of the Fed raising rates this month caused selling in equities. Bonds move opposite to interest rates although can break correlation in deflationary environments (inverse relationship). You can gauge market sentiment for interest rates by looking at government bond futures. SNP500 futures contracts can be influenced by treasury futures contracts so you can view bond futures as a sort of leading indicator for equities. Bond futures are also influenced by commodity trends for inflationary expectations. So you can think of commodity prices as a leading indicator of inflationary trends and typically move in the opposite direction to bond prices.

here is a high level representation of a relationship:

USD -> commodities -> bonds -> equities


Your first point of research needs to be central banks. They dictate policy which drives medium to long term trends. You need to be looking at what they look at in terms of economic data points and you need to be digesting their statements and any speeches. Get to know who the typical doves and hawks are on the boards so that you can pickup when they give clues. Central banks are not in the business of surprising markets, not all of them at least. They tend to prepare markets for policy changes so you need to get a handle on this.

in terms of fundamentals, you need to draw up a list of leading, lagging, and anecdotal indicators to track. Also categorise them according to the cycle:

(expansion ->[jobs, inflation] -> peak [interest rates rise, momentum drops] - > contraction [interest rates fall])

Central bank policy at its most basic form is to maintain a target level of inflation. Yes they also serve a function in keeping markets stable through intervention such as bank capital requirements and through regulation but this in a broad sense isn't information you can trade off. Do keep a close eye on QE programs though as they heavily effect the strength of a currency. Investment banks, hedge funds, and professional retail traders spend a lot of their time fussing about economic indicators. These after all are the data points central banks use to drive policy and intervention. The institutions have analysts that quickly dissect data into something they can trade but you and I need to do this or subscribe to services that help us. Get a good news feed, I use Eikon which you can get through metastock for $99 a month for the fx subscription. I also use a gem of a site called tradingeconomics.

The other element of economic data that drives short term trades are unexpected numbers. In a good news terminal you have expected numbers based on an average consensus and a upper and lower boundary. If a data point is outside of expectations and outside the boundaries then you could have a short term trade on your hands. i say could loosely because it doesn't apply to every data release only the ones that contribute to policy decisions.

Focus on the monthly and not weekly or revised. Here are the main data point areas

- GDP (real,nominal,productivity)
- interest rates (actual and voting spread)
- Labour (employment, earnings, hours worked, costs) = indication of economic cycle
- spending (retail sales, producer prices,wholesales, durable goods, producer prices,personal and disposable income, consumption) = gdp and inflation
- manufacturing (new orders, capacity, utilisation ,index,inventory) = indication of economic cycle
- consumer and business confidence = anecdotal indication changes in conditions
- housing starts, completion, sales = indication of construction activity, consumer demand, employment, demand for durable goods
- imports and exports of goods and services, trade balance, prices = indication of gdp and local manufacturing, cost pressures, changes in competitiveness

Counties that are commodity driven have other factors at play. Oil for example affects CAD, metals affects ZAR and AUD, milk affects NDZ. Also note that when the market is "risk off", the yen will appreciate at least in the short term (trading opportunity)

Studying these give you a good understanding of where an economy is and you can trade short term and\or long term. I use this to open long term positions where i get in\out\in\out in a specific direction against weaker economies. I also trade unexpected data points which on their own don't affect the overall bias but offer short term opportunities. anyway it's late at night and i am off to bed. I hope this is somewhat helpful.
 

new_trader

Legendary member
6,231 1,282
Technical Analysis

OR you can learn to read Price Action because all the news, rumours and other developments are embodied in the action of the market as shown on the tape or in the charts. Become a skilled practitioner of Technical Analysis and you will make money...a lot of money!

Being aware of general conditions is one thing...but keeping track of all the news!? No, I don't waste my time doing that.
 

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