Almost all professional investors have fundamental analysis incorporated in their trading strategy. Another example of economic data are Company’s earnings or the crude oil inventories. These inventories show crude oil investors the trends that are going on in the oil market and how to invest, going forward.


Leveraged margin trading and binary options entail a high risk of losing money rapidly. Well done, you’ve completed Introduction to fundamental analysis, lesson 1 in Fundamental analysis. These two factors may seem unrelated to the markets, but will often drive volatility across multiple assets. Start by looking at the overall economy, before deciding which markets may be overvalued or undervalued.

Advantages and Disadvantages of Fundamental vs Technical Analysis

They study the economy, from industry conditions to the finances of individual companies. In fact, traders often use a combination of both to gain more insights about the market. There are multiple providers of forex signals send traders positions that are ready to be traded out of box. FXStreet has its own signals service with experts at different markets. In the FXS Signals service, you will have access to multiple trading signals, both algorithmic and executed by our team of expert analysts.

Canadian dollar steady, GDP stagnates – MarketPulseMarketPulse – MarketPulse

Canadian dollar steady, GDP stagnates – MarketPulseMarketPulse.

Posted: Wed, 01 Mar 2023 15:17:59 GMT [source]

Similarly, hyperinflation in Germany in the aftermath of the first World War was also caused by political developments that perverted the natural course of economic events. These three strategies go hand-in-hand to help you come up with good forex trade ideas. All the historical price action and economic figures are there – all you have to do is put on your thinking cap and put those analytical skills to the test. The Fundamental Analysis report for any market (equity, commodity, FX etc.) helps in decision-making over medium to long term exchange rate prediction . On the other hand, Technical Analysis provides information for short-term predictions.

What is Technical Analysis?

The curve should dis-invert through the year, and ultimately will steepen out from the front end. This shows a change in the production of factories, mines, and utilities within a nation. It also reports their “capacity utilization,” the degree to which each factory’s capacity is being used. It is ideal for a nation to see a production increase while being at its maximum or near-maximum capacity utilization. You may recognize some of these economic reports, such as the unemployment numbers, which are well-publicized. However, each indicator serves a particular purpose and can be useful.

Challenging March for Bitcoin – Action Forex

Challenging March for Bitcoin.

Posted: Wed, 01 Mar 2023 08:54:36 GMT [source]

Economic indicators are reports released by the government or a private organization that details a country’s economic performance. Economic reports are the means by which a country’s economic health is directly measured, but remember that many factors and policies will affect a nation’s economic performance. The key indicator of economic growth is gross domestic product , which calculates the sum of goods and services produced within an economy. Central banks can be a cause of significant volatility across most asset classes.

It’s important to understand that intermediate and long-term trends don’t happen by accident. In reality, there’s a good reason behind every sustained move in price. Beit news, economic data, or policy moves, there’s always a collection of underpinnings at work driving a bullish or bearish trend. News events include announcements of central bank governors; discussions of intercountry issues, for example, Brexit; replacements of government members. Some news can be predicted, others cannot – in this case, traders have to adjust to the new situation.

FXCM Policies

When economic data failed to support these expectations, the Pound fell like a rock. In order to become a professional forex trader, you will need to know how to effectively use these three types of forex market analysis methods. Fundamental analysis is analyzing the currency price forming, basic economical and other factors influencing the exchange rate of foreign currency. Around the globe, different countries regularly publish economic news tracking areas such as their gross domestic product , unemployment rates, Nonfarm Payrolls , retail sales and inflation.

Political risk often takes the form of market volatility, when it becomes difficult to forecast interest rates or other economic factors that may affect businesses. High taxes may reduce investment returns and the country may institute capital controls, restricting the flow of capital either into the country or out of the country or both. Any type of capital control will reduce the demand for the currency, since investors usually don’t like to lose control of their capital. As I said earlier, technical analysis is much simpler and easier to learn than fundamental analysis, which is often more of an art than a science. The key thing to watch for, is a surprise, especially when central banks are forced to suddenly change approach.


When prices are trending, the assumption is next price movement is more likely than not to be in the direction of the trend, rather than just being random. It is advisable to start working on simple patterns, such as triangular figures, rectangles or reversal patterns. These types of layouts are easier to manage and the novice trader will learn to manage positions without large ranges that increase risks. For new traders, it is advisable to work with simple but very powerful tools, such as trend lines, support and resistance or Japanese candlesticks. The risk-off investors will likely continue exiting stocks on profit recession and they could go back to bonds instead. If the major market catalyzer becomes recession, rather than hawkish Fed, we could see the negative correlation between stocks and bonds come back.

How do I create a Forex Strategy?

You might think that rising should logically lower the value of a currency, but it tends to have the opposite effect if it is seen as more likely to push a central bank towards hiking its interest rate. Applicable to all financial markets and not just forex, this book provides an easy-to-understand overview for using technical analysis​​. This includes chart patterns, trendlines, indicators, and support and resistance levels. Technical analysis uses price charts as the primary input for making trading decisions. For beginner traders, this book could be a good place to start for learning terminology and basic market analysis concepts. One of the most used fundamental analysis tool is the Economic Calendar, which encompasses pre-scheduled financial events, which affect the Forex market.

  • Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
  • Also, it may be a good idea for Erin to look at broader fundamentals, such as the current economic cycle, stock market trends, etc.
  • When they recognise a price pattern that is comparable to what was formed in the past, they know they should buy/sell the asset hoping that the price will evolve in a similar way.

There are thousands of factors that influence the exchange rates, so many that you may become dizzy struggling to analyze all of them at once. We do hope that with our tutorial, you will easily learn everything you need to know about Forex fundamental analysis. Fundamental analysis is a method of evaluating what is happening on the market right now and might happen in the future on the basis of external events and factors.

Intermarket Analysis – John Murphy

Technical analysis helps in the prediction of future market movements based on the information obtained from the past. Fundamental Analysis and Technical Analysis go hand-in-hand in guiding the forex trader through the way the market may go under the ever changing market conditions. Some important indicators to watch out for are gross domestic product , unemployment rate, interest rate and non-farm Payrolls . These indicators are usually located on the official government websites of each country. Below is an example of the gross domestic product for the USA during the first quarter of 2022.


Others, meanwhile, can be the micro factors that are unique to a specific currency or listed company. Think of it as an in-depth, impartial consideration of an asset and the things that can hold sway over it. For traders, there are several tools or resources that can help with the decision-making process. Knowing the right time to buy and the right time to sell is what makes a telling difference to the success of your trades.

  • Their most important action is to raise or lower interest rates, which can have a big impact on currencies, stocks, indices, and more.
  • Consequently, studying the price action of an asset is therefore enough to understand what’s going on with the market participants, and there is no need to assess the individual risk factors.
  • Usually, when a country’s economic outlook is positive, its currency strengthens against its counterparts, as more foreign investors are looking for investment opportunities in this country – and vice-versa.
  • In reality, there’s a good reason behind every sustained move in price.
  • Then, take a look at the specific factors surrounding a handful of assets so you can take your position.
  • Spotting the trend of an asset’s price is the principal objective of technical analysis, and trendlines can help determine potential areas where the trend might be reversing.

The retail sales index provides an estimate of the total sales of goods, but not services, by all retail establishments in the U.S. Although the data are adjusted for seasonal, holiday, and trading-day differences between the months of the year, it is not adjusted for inflation. And is designed to measure changes in the industrial sector output, which constitutes about 20% of GDP.

Central banks are responsible for setting interest rates on a currency in an effort to control its value. Fundamental analysis is a method of evaluating securities to determine their intrinsic value. It considers the financial situation of a company or other asset and the overall health of the market it trades in using key economic data. Technical analysis does not account for implied volatility; it is focused solely on price action. This can pose a significant risk to leveraged trading strategies that discount fundamentals in favor of technicals. Familiarity with the wide variety of forex trading strategies may help traders adapt and improve their success rates in ever-changing market conditions.