3 Tips for Using Forex News for Fundamental Analysis
3 Tips for Using Forex News for Fundamental Analysis - Many traders say that forex news is confusing and often does not match price movements, so it is not possible to succeed using fundamental analysis. In fact, this is only because of errors in using forex news. For example, because certain economic data is green, it means that if you buy it is definitely a success, in fact the green one is only one data, while the other data is actually red.
Also read: Tips on Forex Trading While Working For Beginners
So, how can we interpret forex news for fundamental analysis correctly? Check out the following three tips:
News-Trading is not fundamental analysis, and fundamental analysis is different from News-Trading. The function of forex news in fundamental analysis is to provide a reference for Swing Trading or Position Trading, not for scalping or News-Trading.
Famous professional traders generally use fundamental analysis to underlie long-term currency strength assessments, not as an Open Position guide. For example, if a currency tends to be bullish, then they will put a higher target when open Buy, and be more strict and careful when opening Sell.
Every day there is a lot of economic data released from many countries. However, actually in normal market conditions, only seven traders need, namely: GDP (Gross Domestic Product), Consumer Inflation (CPI), Employment (Unemployment Rate, Non-farm Payroll, etc.), Retail Sales (Retail Sales), Interest Rates, Business Sentiment, and Central Bank Policy.
Changing one data alone is not enough to weaken or strengthen a currency in the long run. If the majority of data tends to be bearish, then the currency will weaken; and vice versa.
Practically, traders can make a list of each of the currencies and the seven economic indicators, then simply mark Bearish (the latest actual data is worse than expected), Bullish (the latest actual data is better than expected), or Neutral (the actual data corresponds to expectations). Calculate which one is more, then that's the bias of the exchange rate; up to a month ahead or until most of the data changes direction.
Although the seven types of economic data above are very important, don't assume that only seven of them need to be considered by traders. Explosive news such as the release of Britain from the European Union (Brexit), the Russian invasion of the European Union, and other political and security related events could have a greater impact than economic data.
Be aware that in addition to normal market conditions, there are also fundamental "abnormal" market conditions. In such conditions, even though the majority of economic data is bullish, the exchange rate can remain depressed. Therefore, even though you already have the seventh data reference above, you still cannot ignore forex news that is politically sound. Add at least one point regarding the assessment of political conditions and security on the list you made in point two.
Thus tips that I can share this time about 3 Tips for Using Forex News for Fundamental Analysis. Hopefully this fairly short article can be useful for you and good luck.
Also read: Tips on Forex Trading While Working For Beginners
So, how can we interpret forex news for fundamental analysis correctly? Check out the following three tips:
1. Don't Use Forex News For News-Trading
News-Trading is not fundamental analysis, and fundamental analysis is different from News-Trading. The function of forex news in fundamental analysis is to provide a reference for Swing Trading or Position Trading, not for scalping or News-Trading.
Famous professional traders generally use fundamental analysis to underlie long-term currency strength assessments, not as an Open Position guide. For example, if a currency tends to be bullish, then they will put a higher target when open Buy, and be more strict and careful when opening Sell.
2. Pay attention to these seven economic data
Every day there is a lot of economic data released from many countries. However, actually in normal market conditions, only seven traders need, namely: GDP (Gross Domestic Product), Consumer Inflation (CPI), Employment (Unemployment Rate, Non-farm Payroll, etc.), Retail Sales (Retail Sales), Interest Rates, Business Sentiment, and Central Bank Policy.
Changing one data alone is not enough to weaken or strengthen a currency in the long run. If the majority of data tends to be bearish, then the currency will weaken; and vice versa.
Practically, traders can make a list of each of the currencies and the seven economic indicators, then simply mark Bearish (the latest actual data is worse than expected), Bullish (the latest actual data is better than expected), or Neutral (the actual data corresponds to expectations). Calculate which one is more, then that's the bias of the exchange rate; up to a month ahead or until most of the data changes direction.
3. Many Things Apart from Economic Data That Can Be Market-Mover
Although the seven types of economic data above are very important, don't assume that only seven of them need to be considered by traders. Explosive news such as the release of Britain from the European Union (Brexit), the Russian invasion of the European Union, and other political and security related events could have a greater impact than economic data.
Be aware that in addition to normal market conditions, there are also fundamental "abnormal" market conditions. In such conditions, even though the majority of economic data is bullish, the exchange rate can remain depressed. Therefore, even though you already have the seventh data reference above, you still cannot ignore forex news that is politically sound. Add at least one point regarding the assessment of political conditions and security on the list you made in point two.
Thus tips that I can share this time about 3 Tips for Using Forex News for Fundamental Analysis. Hopefully this fairly short article can be useful for you and good luck.
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