Fundamentals have been widely used in trading for thousands of years.
In stock trading, the fundamental analysis of companies is more advantageous than the technical analysis of long-term investments.
However, in China, technical analysis is more popular due to its volatility and short term nature.
Still, fundamental analysis is important;
Many professionals also use it to make money.
If you rely on fundamental analysis, what are the common pitfalls you encounter that could leave your trading account in the red?
It depends on the news effect.
You cannot rely on specific news effects that may be affected by the pair.
For example, good news about something doesn’t always drive it, and bad news doesn’t always cause it.
In addition, such news releases can be followed by a period of intense volatility that will cause your base guess to fail.
While this usually happens when US fundamental indicators are published, similar behaviour is sometimes found in other currencies and countries.
Intraday fundamental trading.
The intraday use of fundamental analysis is not unique in the market.
I know many people who enjoy day trading.
However, most of them fail because basic analysis is usually not suitable for this use.
Fundamental indicators can identify long-term trends, but short-term changes are sometimes highly volatile.
Reliance on it may lead to greater losses.
Confuse “good for the currency” with “good for the economy.”
In general, economic indicators that are positive for a country’s currency may be seen as more negative for the economy, and vice versa.
This happens because a depreciating currency tends to benefit the country’s exporters, while an appreciating currency tends to hurt its trade balance and manufacturing sector.
So you should keep in mind that not all positive macroeconomic reports are good for the currency you buy.
On a personal level, use fundamental analysis in forex trading, but also pay attention to its potential problems.
If you want to use fundamental analysis as your main trading method, that’s fine — as long as you use the tool carefully.
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.
