Fundamental news is available throughout the day, with traders watching economic data, corporate earnings, statements, political developments and more.
So, how to do a good job of foreign exchange fundamental analysis?
Supply and demand Supply and demand are the primary drivers.
Market participants drive markets, not news == news or economic data.
In other words, if it goes down, it’s because most traders are selling, not buying.
If so, it is because demand for dollars has increased and supply has decreased.
If you have studied this in detail, and your research shows that your fundamental view supports the market moving one way or the other, then you must be confident and trade on your findings.
If you choose to ignore research or change your mind, you will have to ignore fundamental analysis altogether and focus on price trends instead.
Short-term Mindset If trading in the short term, traders are better off creating models that focus on prices and technical conditions.
Fundamental analysis is better suited to provide screening, such as limiting trading options to one side of the market, long or short.
What are the limitations of basic analysis of foreign exchange?
1. Not all the basic factors are known at any point in time;
2. The importance of different fundamental factors changes over time.
It’s hard to know when these fundamentals are most important;
3. Ordinary speculators may be difficult to gather and interpret from the information available in each market.
4. Basic analysis often fails to answer questions that most speculators face, such as the problem of immediate selection;
5. Most factor statistics are available only after the fact.
When this information is collected by different government agencies or news organizations around the world, it often becomes outdated information that does not necessarily reflect recent circumstances;
6. Fundamental factors may change significantly due to sudden changes in weather, politics, international events and some scientific and technological factors.
It will take time for these problems to be reflected in actual fundamentals;
7. The enormous effort required to collect, update and interpret essential element data may not yield effective returns in the long run;
8. Most basic analyses do not provide changes based on price behaviour but reflect changes based on internal conditions.
These changes can be slow.
In fact, when trends start to change significantly, there is no visible or understandable change to support the reasons to go long or short.
Markets shrugged off the Fed‘s doubling, the dollar fell from a three-week high and gold rallied more than $20.
Please pay attention to the specific operation, the market is changing rapidly, investment needs to be cautious, the operation strategy is for reference only.
