What is it exactly and will I need to use it? Well, fundamental analysis is the study of fundamentals!<\/p>\n\n\n\n
That was easy, wasn\u2019t it? Ha! Gotcha!<\/p>\n\n\n\n
There\u2019s really more to it than that. Soooo much more.<\/p>\n\n\n\n
Whenever you hear people mention fundamentals, they\u2019re really talking about the economic fundamentals of a currency\u2019s host country.<\/strong><\/p>\n\n\n\n Economic fundamentals cover a vast collection of information \u2013 whether in the form of economic, political, or environmental reports, data, announcements, or events.<\/p>\n\n\n\n Even a credit rating downgrade qualifies as fundamental data.<\/p>\n\n\n\n Fundamental analysis is the use and study of these factors.<\/strong><\/p>\n\n\n\n It is the study of what\u2019s going on in the world and around us, economically and financially speaking, and it tends to focus on how macroeconomic elements (such as the growth of the economy, inflation, and unemployment) affect whatever we\u2019re trading.<\/p>\n\n\n\n Fundamental analysis involves studying economic trends and geopolitical events that might affect currency prices. In other words, it\u2019s the study of financial news and economic data.<\/p>\n\n\n\n The most important economic data to watch for include:<\/p>\n\n\n\n When a piece of economic data is released, fundamental analysis provides insight into how price action \u201cshould\u201d or may react to a certain economic event.<\/p>\n\n\n\n Fundamental data takes shape in many different forms.<\/p>\n\n\n\n It can appear as a report released by the Fed on U.S. existing home sales. It can also exist in the possibility that the European Central Bank will change its monetary policy.<\/p>\n\n\n\n The release of this data to the public often changes the economic landscape (or better yet, the economic mindset), creating a reaction from investors and speculators.<\/p>\n\n\n\n There are even instances when no specific report has been released, but the anticipation of such a report happening is another example of fundamentals.<\/p>\n\n\n\n Speculations of interest rate hikes can be \u201cpriced in\u201d hours or even days before the actual interest rate statement.<\/p>\n\n\n\n In fact, currency pairs have been known to sometimes move 100 pips just moments before major economic news, making for a profitable time to trade for the brave.<\/p>\n\n\n\n That\u2019s why many forex traders are often on their toes prior to certain economic releases and you should be too!<\/p>\n\n\n\n Generally, economic indicators make up a large portion of data used in fundamental analysis. Like a fire alarm sounding when it detects smoke, economic indicators provide some insight into how well a country\u2019s economy is doing.<\/p>\n\n\n\n While it\u2019s important to know the numerical value of an indicator, equally as important is the market\u2019s expectation of that value<\/strong>.<\/p>\n\n\n\n Understanding the resulting impact of the actual figure in relation to the forecasted figure is the most important part. These factors all need consideration when deciding to trade.<\/p>\n\n\n\n Phew!<\/p>\n\n\n\n Don\u2019t worry. It\u2019s simpler than it sounds and you won\u2019t need to know rocket science to figure it all out.<\/p>\n\n\n\n I suggest you visit Pip Diddy\u2019s daily economic roundup every day so that you can stay in the loop with the upcoming economic releases.<\/p>\n\n\n\n Fundamental analysis is a valuable tool in estimating the future conditions of an economy<\/strong>, but not so much for predicting currency price direction<\/strong>.<\/p>\n\n\n\n This type of analysis has a lot of gray areas because fundamental information in the form of reports, economic data releases, or monetary policy change announcements is vaguer than actual technical indicators.<\/p>\n\n\n\n Analysis of economic releases and reports of fundamental data usually goes something like this:<\/p>\n\n\n\n \u201cAn interest rate increase of that percentage MAY cause the euro to go up.\u201d<\/p>\n\n\n\n \u201cThe U.S. dollar SHOULD go down with an indicator value in that range.\u201d<\/p>\n\n\n\n \u201cConsumer confidence dipped 2% since the last report.\u201d<\/p>\n\n\n\n The market has a tendency to react based on how people feel. These feelings can be based on their reaction to economic reports, based on their assessment of current market conditions.<\/p>\n\n\n\n And you guessed it \u2013 there are tons of people, all with different feelings and ideas.<\/p>\n\n\n\n You\u2019re probably thinking \u201cGeez, there\u2019s a lot of uncertainty in fundamental analysis!\u201d<\/p>\n\n\n\n You\u2019re actually very right.<\/p>\n\n\n\n There\u2019s no way of knowing 100% where a currency pair will go because of some new fundamental data.<\/p>\n\n\n\n That\u2019s not saying that fundamental analysis should be dismissed.<\/p>\n\n\n\n Not at all.<\/p>\n\n\n\n Because of the sheer volume of fundamental data available, most people simply have a hard time putting it all together.<\/p>\n\n\n\n They understand a specific report, but can\u2019t factor it into the broader economic picture. This simply takes time and a deeper understanding of the data.<\/p>\n\n\n\n Also, since most fundamental data are reported only for a single currency, fundamental data for the other currency in the pair would also be needed and would then have to be compared to get an accurate picture.<\/p>\n\n\n\n As we mentioned from the get-go, it\u2019s all about pairing a strong currency with a weak one.<\/p>\n\n\n\n At this point, you\u2019re probably still waiting for the answer to \u201cWill I ever need to use fundamental analysis to become a successful forex trader?\u201d<\/p>\n\n\n\n We totally understand that there are purists on both sides.<\/p>\n\n\n\n Technical analysis\u00a0seems to be the preferred methodology of short-term forex traders, with price action as their main focus.<\/p>\n\n\n\n Intermediate or medium traders and some long-term traders like to focus on fundamental analysis too because it helps with currency valuation.<\/p>\n\n\n\n We like to be a little crazy by saying you should use BOTH!<\/p>\n\n\n\n Technically focused strategies are blown to bits when a key fundamental event occurs.<\/p>\n\n\n\n In the same respect, pure fundamental traders miss out on the short-term opportunities that pattern formations and technical levels bring.<\/p>\n\n\n\n A mix of technical and fundamental analysis covers all angles. You\u2019re aware of the scheduled economic releases and events, but you can also identify and use the various technical tools and patterns that market players focus on.<\/p>\n\n\n\n I have a couple of trade examples for you showing how the perfect blend of fundamental and technical analysis results in huge profits.<\/p>\n\n\n\n Check out Cyclopip\u2019s\u00a0huge win on EUR\/JPY\u00a0and Happy Pip\u2019s\u00a0115-pip profit on NZD\/USD.<\/p>\n\n\n\n There\u2019s your answer!<\/p>\n\n\n\n Happy?!<\/p>\n","protected":false},"excerpt":{"rendered":" Along your travels, you\u2019ve undoubtedly come across Gulliver, Frodo, and the topic of fundamental analysis. Wait a minute\u2026 We\u2019ve already given you a teaser about fundamental analysis during Kindergarten! Now let\u2019s get to the nitty-gritty! What is it exactly and will I need to use it? Well, fundamental analysis is the study of fundamentals! That was easy, […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[860],"tags":[],"_links":{"self":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/9743"}],"collection":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/comments?post=9743"}],"version-history":[{"count":0,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/9743\/revisions"}],"wp:attachment":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/media?parent=9743"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/categories?post=9743"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/tags?post=9743"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Fundamental Data and Its Many Forms<\/h2>\n\n\n\n
Here\u2019s an Economic Report, Now What?<\/h2>\n\n\n\n
![\"Forex](\"https:\/\/bpcdn.co\/images\/2016\/05\/grade14-technical-vs-fundamental-analysis.png\" "\\"Forex")
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