What Is Fundamental Analysis
Technical Analysis is the art of predicting market movements using visual representation and to time your trades accurately.
Whereas fundamental analysis is the understanding of macro and global economic events and data released by countries to issue to the markets which highlight whether there is growth in the country or not.
These data points are crucial to understand and look out for as they can move the market significantly.
For example, the non-farm payroll can move the market 30-100 pips within seconds depending on the data released.
If you have trades open during these times, you can be taken out of a trade and what could have been a winning trade, could quickly change based on the data output.
So, one of our rules to trading is to not trade near or during high-impact news events.
Why Use Fundamental Analysis
It is important to learn how the economies are doing as these play huge roles in whether a currency price is rising or falling.
Economic Data drives the prices of the currencies, so by understanding how different economies are doing in a general direction can easily highlight where the markets could go over a course of several months or greater.
The way we like to explain it is imagine a treasure map.
Fundamental analysis is the map for you to follow.
Technical analysis is the tools to dig for treasure.
Without either, it’ll make hunting for that treasure hard!
It’s a simple analogy but it’s pretty clear that both forms work hand in hand.
In fact, if you can understand an economies underlying strength and weaknesses – you will not be surprised when something happens in the near future.
For example, you can gauge the impact of NFP prior to the event by simply following the weekly claims data.
This is really simple stuff, but will put you leagues ahead of other retail traders and most importantly — avoid making mistakes that can cost you money.
Avoiding mistakes is one thing, but once you understand economic data points you will be able to use this as an invaluable asset to your trading.
How To Use Fundamental Analysis
In this section, we will go through the key data points released each month, what they mean and how the effect the markets.
In this course, you only need to understand the forex trading basics as you will not be holding onto your trades for months/years etc.
You will be using the data points to gauge and build an idea on the direction of the overall market sentiment and enabling you, by understanding the economies, a greater advantage of trading in the right direction with the smart money.
A lot of courses will shy away from this section because it is more “academic” and they don’t fully understand the impact of these events on a larger level. We will be going into great detail with trading economic data in the future.
The most overlooked part of fundamental analysis for many traders (especially beginners) is the very short-term impact they have on the market.
By highlighting these high-impact data points, this will help reduce poor trades and should always be taken into consideration when entering a trade. The whole point of this free forex trading course is to share the true golden nuggets with you and to reduce the element of luck involved in trading!
With fundamental analysis, it is important to consider the impact of each data across each asset – this is the kind of analysis that will take the longest to learn, but when you do – everything will be part of a bigger picture and making trading so much easier to profit from.