Forex Fundamental Analysis Tutorial
In this tutorial you will learn how to implement fundamental analysis in your trading style. This is what some people called institutional Forex trading system. You should learn the basic macroeconomic factors that influence global market. This is called fundamental analysis.
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There is a great controversy between traders that use only technical analysis and traders that use only fundamental analysis. For me this is only academic. If there is information out there you should carefully watch it. Do not rely only in technicals or fundamentals. Use both. When you have a solid technical pattern that is supported by fundamentals then the chance that you are right is imminent. When technicals and fundamentals show in different directions then you should watch out. Do not be trigger happy with your Forex trading. Wait and see. Forex is not for prophets. You use scientific analysis in order to maximize the chance that you correctly recognize what the market has to give you. Analyze thoroughly, have a solid technical pattern, know the fundamental support of your analysis and you have a nice trading decision. Seize your risk tolerance and you will be a winner.
Every nation has it's central bank which is responsible for the well being of the economy. Central banks watch some economic factors that affect the economy and adjust their economic policy accordingly. These factors are announced regularly and the exact time of the announcement is known in advance. These factors are the fundamental indicators of the economy. The most important central banks are FED of USA, ECB of European Union, BOJ of Japan and BOE of United Kingdom. There are many fundamental indicators but there are few of them that are called the "market movers". They are called so because when they are announced they provide to the market the necessary steam to move. That happens because they have a great impact on the economy and to traders' positions also.
The most important thing you have to know about fundamental analysis is the market expectation of an indicator. Some analysts provide a probable number of the indicator to be announced. This has an impact to the market and traders are positioned accordingly. When the indicator is announced it affects the market only when it is much different than the market expected. That happens because everything available to the public is already taken into account. When the new information is announced then it has impact on the market only if it is different than expected.
Build up your plan. Know in advance what important fundamental indicators are to be announced the following week. Learn the expected number if it is available and try to forecast what will happen if it comes in as a better or worse figure. This is difficult for the beginners but after studying it will be easy.
There are many fundamental indicators. US indicators have the greatest impact on the market. European Union's indicators have less impact unless they are much different than expected. Watch out for central banks' head officers speaking out and giving clues about inflation and interest rates. Today these are the two drivers of the economy. Words like vigilant or very vigilant about inflation from central banks' heads have great impact on the currencies. When inflation is up, central banks try to keep it low by leveraging interest rates. When interest rates are up then the currency is supported. Learn what economic indicators reflect the inflation and the decision of central bank about interest rates and you have an extra tool in your arsenal in order to trade. Always watch what the market already knows because all this information is reflected in the prices of the market. When fresh important information comes out, learn about it and position yourself accordingly.
There is plenty of information about fundamental indicators in the internet. Visit the Bloomberg economic calendar and the Yahoo economic calendar. Use keywords like "Forex fundamentals" or "Forex economic calendars" and you will find what you need. Study the meaning of these indicators and the relationships between them. Most Forex providers have a built in economic calendar with their trading platforms. The time on these economic calendars is frequently GMT. Learn your time zone and the difference between your zone and GMT and you will know the exact time the indicator will be announced. In these economic calendars, market consensus, if available, is already reported. Study carefully the economic indicators. You will eventually have a great guide to help you in your trading.
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