There is far too little about this topic on this forum. Come to think of it i have never seen anyone on this forum dive into trading using a pure fundamental strategy.
Thread rule:
1) Those of you who's veins are made from trend lines. If say something that challenges your thinking, your world, your anger (not this mug again); then come and chat - do keep it on the friendly side.
Quick note about me:
10 years using pure technical analysis followed by 4 years of adding fundamental analysis and the last 2 years focusing entirely on the fundamentals. Trading technically for me became frustrating working on tuning risk and filtering junk trades. I started adding fundamentals as an experiment to filter the junk. After a few years of getting a handle on it i started reducing my losers and discovering i could trade without technical analysis altogether. I took the plunge and have never looked back. These days i probably spend no more than a minute on charts to set an order or enter at market. I trade medium to long term catching shifting economies. I also trade intraday but only on specific events.
I am not sure what the general perception is of a fundamental trader. I used to think it was a ton of research and watching news all day and i was largely wrong. News does affect fx although it doesn't do so on a regular basis. I am not going to discuss news trading to keep the process clear for anyone wishing to give it a go.
I need to start with trades that are planned to last for months. The knowledge you need to know for trading this way gives strong foundation to trading intraday economic releases (covered later).
Economies have cycles and some cycles take longer through stress. The thing is there are only 4 phases ( trough, recovery, peak, recession) that rinse and repeat over and over but do take time to transition. There are lots of economic indicators for every country. You don't need to know them all just the ones that indicate how an economy is doing. This list is the grouping of importance (top is highest rank)
inflation
Interest rates, GDP
imports exports, labor, manufacturing, services, (oil,commodities)
debt, accounts
I wont go into individual indicators because i want to focus on the general approach. I use a site called tradingeconomics to study each area of the economy and note down a simple paragraph explaining whats going on and write a new one every month. Each paragraph is followed by a bullet list of the main measurements (GDP, interest rates, inflation, labour) because these are key areas i need to know offhand. These paragraphs i read at least once because it does instil an ability to know who is strong and who is weak. i can't stress the importance of this because it is where your trading ideas are born.
I read every central bank statement as it gives me an understanding where the bankers concerns are and how they might act. Most central banks are not in the business to spook the market although some are awful at it.
Using indicators and tracking central banks gives me a roadmap of who to trade against each other. When data starts giving several deviations to one side successively, at increased regularity, or gradually; then you have a trade opportunity. If you can match apposing economies then you will have a shift in price to what will become a trend (long or short term). I chose what to trade based on strength and interest rate. It is far more profitable trading when the rollover is in your favour or as small as possible. Shifts generally associate with interest rates and as such you need to be aware of what sort of target you are looking for. What has worked well for me setting an initial target of 4 to 5 percent change from current prices. As shifts take a long time, I review momentum based on the underlying economy and if there is room I will trade again at a better price.
So long term trading for me is getting into multiple positions that can last for months at a time and repeated until the cycle changes.
intraday trades:
I trade deviations in the major indicator groups given when news is released. So for example if PMI is expected to be 50, was last 49 and comes out 53 then i am a buyer against a weaker currency. Likewise if its 47 then i am a seller. I will even open a position against a long term trade (taking partial profits in the long term trade at the same time and get back in at a better price). These deviations do not change the status of overall health of an economy but do over time. These deviations will impact the session and i can make anything from 50 to over 100 pips. Sometimes I front run the release and do so when i know a shift is taking place and have a good understanding of the direction it will likely unfold. I don't front run on the day of the release but perhaps a session or several beforehand.
Commodity affecting currencies:
its worth a note that i do trade based on energy (oil) and commodity data such as milk (NZ) or metals (AU). When oil news or reserve data comes out i will be looking to trade deviations with CAD.
tools:
i do general research using Eikon and also use it for instant printing of a data releases. As i have stated earlier i also use a site called tradingeconomics which is a gem of a tool for historical economic data.
planning:
i will plan the week ahead in terms of major economic data points and also daily. Basically i keep track of release times and days. The reason i said it is so important to study the summary paragraphs is because i don't include them in my planning. That is just essential back-work. Planning is nothing more than the schedule. My day is light in terms of research which i tend to do at night. This makes the day extremely simply and really a case of sitting on my ar5e and waiting for events to happen. Some days and even weeks there might not be much on. These are coincidentally the same weeks that chew technical traders up as you have sideways action.
Well that's enough for now. I hope it gives some clue as to my routine. if there are typos in here i am sorry i will fix them if i see then. I can't be bothered to read all i have written so fingers crossed its not muddled.
Thread rule:
1) Those of you who's veins are made from trend lines. If say something that challenges your thinking, your world, your anger (not this mug again); then come and chat - do keep it on the friendly side.
Quick note about me:
10 years using pure technical analysis followed by 4 years of adding fundamental analysis and the last 2 years focusing entirely on the fundamentals. Trading technically for me became frustrating working on tuning risk and filtering junk trades. I started adding fundamentals as an experiment to filter the junk. After a few years of getting a handle on it i started reducing my losers and discovering i could trade without technical analysis altogether. I took the plunge and have never looked back. These days i probably spend no more than a minute on charts to set an order or enter at market. I trade medium to long term catching shifting economies. I also trade intraday but only on specific events.
I am not sure what the general perception is of a fundamental trader. I used to think it was a ton of research and watching news all day and i was largely wrong. News does affect fx although it doesn't do so on a regular basis. I am not going to discuss news trading to keep the process clear for anyone wishing to give it a go.
I need to start with trades that are planned to last for months. The knowledge you need to know for trading this way gives strong foundation to trading intraday economic releases (covered later).
Economies have cycles and some cycles take longer through stress. The thing is there are only 4 phases ( trough, recovery, peak, recession) that rinse and repeat over and over but do take time to transition. There are lots of economic indicators for every country. You don't need to know them all just the ones that indicate how an economy is doing. This list is the grouping of importance (top is highest rank)
inflation
Interest rates, GDP
imports exports, labor, manufacturing, services, (oil,commodities)
debt, accounts
I wont go into individual indicators because i want to focus on the general approach. I use a site called tradingeconomics to study each area of the economy and note down a simple paragraph explaining whats going on and write a new one every month. Each paragraph is followed by a bullet list of the main measurements (GDP, interest rates, inflation, labour) because these are key areas i need to know offhand. These paragraphs i read at least once because it does instil an ability to know who is strong and who is weak. i can't stress the importance of this because it is where your trading ideas are born.
I read every central bank statement as it gives me an understanding where the bankers concerns are and how they might act. Most central banks are not in the business to spook the market although some are awful at it.
Using indicators and tracking central banks gives me a roadmap of who to trade against each other. When data starts giving several deviations to one side successively, at increased regularity, or gradually; then you have a trade opportunity. If you can match apposing economies then you will have a shift in price to what will become a trend (long or short term). I chose what to trade based on strength and interest rate. It is far more profitable trading when the rollover is in your favour or as small as possible. Shifts generally associate with interest rates and as such you need to be aware of what sort of target you are looking for. What has worked well for me setting an initial target of 4 to 5 percent change from current prices. As shifts take a long time, I review momentum based on the underlying economy and if there is room I will trade again at a better price.
So long term trading for me is getting into multiple positions that can last for months at a time and repeated until the cycle changes.
intraday trades:
I trade deviations in the major indicator groups given when news is released. So for example if PMI is expected to be 50, was last 49 and comes out 53 then i am a buyer against a weaker currency. Likewise if its 47 then i am a seller. I will even open a position against a long term trade (taking partial profits in the long term trade at the same time and get back in at a better price). These deviations do not change the status of overall health of an economy but do over time. These deviations will impact the session and i can make anything from 50 to over 100 pips. Sometimes I front run the release and do so when i know a shift is taking place and have a good understanding of the direction it will likely unfold. I don't front run on the day of the release but perhaps a session or several beforehand.
Commodity affecting currencies:
its worth a note that i do trade based on energy (oil) and commodity data such as milk (NZ) or metals (AU). When oil news or reserve data comes out i will be looking to trade deviations with CAD.
tools:
i do general research using Eikon and also use it for instant printing of a data releases. As i have stated earlier i also use a site called tradingeconomics which is a gem of a tool for historical economic data.
planning:
i will plan the week ahead in terms of major economic data points and also daily. Basically i keep track of release times and days. The reason i said it is so important to study the summary paragraphs is because i don't include them in my planning. That is just essential back-work. Planning is nothing more than the schedule. My day is light in terms of research which i tend to do at night. This makes the day extremely simply and really a case of sitting on my ar5e and waiting for events to happen. Some days and even weeks there might not be much on. These are coincidentally the same weeks that chew technical traders up as you have sideways action.
Well that's enough for now. I hope it gives some clue as to my routine. if there are typos in here i am sorry i will fix them if i see then. I can't be bothered to read all i have written so fingers crossed its not muddled.
Trading Economics
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