Fundamental Analysis Trading

The trading system based on fundamental analysis

Introduction

I want to tell you how I came to the conclusion that none of the types of Fundamental Analysis Trading will not be effective if you apply it in isolation, without considering in conjunction with other types of analysis.

A striking example is the wave analysis. If you look at the analysis of various analysts, the wave Fundamental Analysis Trading, we can see each analyst's own forecast. This prediction is different from the forecasts of other analysts of the wave analysis. Do the Fundamental Analysis Trading one currency pair, and trade, is quite another. How to find a way out. I want to say that even though not on any evidence or any other trading method, each trader needs to develop its own approach and use their strategy for forex trading. It is produced by a theoretical study of disciplines, practices and trading experience.

I want to talk about his approach to the forex market, a strategy that can be applied with a small deposit, and low risk. It is possible, if knowledge of the basics of Fundamental Analysis Trading. As well as the practical application of technical (Dow theory, the wave, a candle) analiza.Ya for six years, as familiar with the Forex market and convinced of the viability of this strategy. Despite the fact that the market in 2005 was different from the market in 2011, this technique worked, then as she is today. Although some approaches that worked then, now is not working. So, then, in 2005, was relevant at all other information for traders of the forex market. Then all waited for what economic data is better in one way or another country, especially the euro area and the U.S.. And as the UK. And so, on the basis of these data, traders built their strategy. Everyone was waiting for good data from the Eurozone, then to expect higher interest rates on euro to catch up with U.S. rates. And so the waiting enhance growth of euro against U.S. dollar.

Now, as you know the situation is different. On the one hand, the euro area with debt, on the other hand the economic problems in the U.S.. This still needs to add the difference between the rates of the euro zone and the U.S.. And the expectations of traders that the Euro is much interest rates will overtake the United States. As you can see, and the Fundamental Analysis Trading data of 2005 and the technical picture on the chart 2005 differ from the picture in 2011.

What is Technical Analysis? Price chart is a reflection of the behavior of many thousands of traders, reacting to the behavior of public banks, heads of government, as well as many officials in the field of finance. From the above, I would say that technical analysis is a response to fundamental factors (political, economic, technological, natural disasters) on the part of traders, both private and institutional. Therefore, all that is on the chart is the reaction of traders, banks and other financial institutions on the above factors. So far, no debate is going, how best to trade based on fundamental or technical analysis. And each proves his innocence.

In this article I want to talk about trading strategies, which argues that a strategy based on a combination of fundamental and technical analysis gives the best result.

The process of creating the trading system based on Fundamental Analysis Trading

Let's look at history. When in 1999 the euro was born, I already thought that he was greatly underestimated. And so long before that, bought the German mark, to exchanging them, make yourself a complete overhaul. Then I did not have schedules. I used only Fundamental Analysis Trading. I thought that game for a fall, this fear of the new currency, which can not prove its viability. So it kind of was. In 2000 - 2002 году state-owned banks were confident in the viability of the euro as the second global currency, and began to include in its assets to a new reserve currency - the euro. On the monthly chart EUR-USD then formed a triple bottom.

I looked recently at the archive of a dealing center, where the wave analysis. He did not give an unambiguous answer to this schedule, the 2000-2002 pair of eur-usd. Based on the Fundamental Analysis Trading, it could be a continuation or a reversal? While many traders were confident in the growth of the Euro, as I did then, which had no graphics at your fingertips. I cite this example of what is better: fundamental or technical analysis.

In 2004, consolidation has begun between the dollar and euro, which lasted until January 1, 2006. Do you know why? Until then I had already realized that consolidation was due to the fact that traders were not convinced by raising interest rates in the euro zone. And when the head of the ECB said that we start raising interest rates, since inflation risks are very high, or something like that, the rate flew up, breaking through the zone 2 year consolidation. (Since the ECB's main task is to prevent the high inflation in the euro area as a problem when the Fed among others, ensuring the maximum possible employment). And then the rates on the U.S. coming to an end, and the euro was just beginning a cycle of rate hikes.

Many traders began to buy euros and gold. Gold soared upward with a gap, began a bull market in gold. Euro rally beginning at 5 wave Elliott. Even then I realized that it must have its own strategy, which takes into account primarily the Fundamental Analysis Trading factors that should be reflected in the chart. If for example, after a major political or economic events or did not happen, then the chart just after neither of which has emerged, would be a normal correction. Yes, sometimes it is often difficult to determine what impact will this or that political or economic event.

The rules of the trading system

In connection with the above events, the first rule for me was:

TO COURSE FOR SENIOR TAIMFREMAH should move in some aspect, UP OR DOWN, TO BE important political, economic events that affect the entire global economy.

It should be clear and understandable. For example, this event is a beneficial effect on the euro but this event, by contrast, will have negative on the euro. As I indicated earlier, the triple bottom in the 2000-2002 year, as well as a double top in 2008 and the global financial crisis. If the event happened, but it is not clear how it will affect the economy, then you should keep away from long-term deals. Or chart must show that traders are willing to shift course after a significant event, or event is intended to indicate that traders formed the shape of the technical Fundamental Analysis Trading course in isdvinut certain direction.

Yes, after the statements of the ECB in 2006, after a few weeks in April 2006, the weekly figure is formed: the inverted head - shoulders. But not before this event, you can not pay attention. And so the one who already knew what would be the euro to rise against the dollar, to prepare for this trend, and not spend his deposit on smaller deals.

Second Rule.

If the chart shows something that resembles the shape of technical analysis, and significant events in the world does not, then it is most likely a fraud. Or 50 to 50, may go beyond the rate of consolidation of this figure, or maybe just formed a new figure.

Because the flag can easily turn into a double top. After Wave analysis as to give an unambiguous answer to the pulse waves. It can only point to possible targets. Therefore, in this case with a small deposit to hold off the market. However, if you use technical analysis, design, to what purpose can walk the course, and then being careful about the Fundamental Analysis Trading data, then you can just get out and record profits, as they enter into it. This applies primarily to long-term deals.

For example, for a long time, traders were confident that the Reserve Bank of Australia will keep interest rates high, and it may increase. However, when the rate began to approach one of the planned objectives 1.12, then the head of the RBA was not so optimistic in his comments about further rate hikes, and it was the beginning of the profit and with a possible reversal of the level of 1.10-1.1070. This is a clear signal the end of the trend. On the monthly chart formed a double top reversal pattern. But initially projected target was 1.1185. A possible rate could go even further.

Now, as you describe how the understanding of the market. Where do I enter the market, and where to leave it. When followed by one currency pair, then gradually get to the heart motion of the pair. For example, what is currently happening in the market. Indifference traders, or someone commits a profit and rate will go into reverse. Or start new purchases, opening long positions. All this comes with experience.

And at the right time, is already becoming clear, here you can join the deal and get here. One example. Once started the trend eur-usd 1.1820 against the mark in February 2006, began to form shapes to continue the trend mark 1.60.

But after the international financial crisis, the trend has come to an end. Formed a double top on the monthly chart, after which he was to fall back where you started its move from parity rates of interest. In the region of 1.24. Although with other kinds of technical, wave analysis it was difficult to do. I watched while predictions of many analysts of the wave. You can see the archive now, none have pointed out exactly where to go market.

Thus, the third rule for long-term strategy.

After the course went on a scheduled plan, we do not define precise objectives, we select the possible shutdown of the course. The most likely stop the course can be 50% Fibonacci ratio of the previous trend. Or two other relations 38.2 and 61.8. Depending on the technical picture.

This true story may stop at important support or resistance levels, which are in contact with the above levels of fib. Or boundaries both ascending and descending channel.

Once the course is suitable to these levels, look to see if there is a clear figure continuation or reversal, if there is a rebound from these levels. If so, you should pay attention, what is the reason, or is it just a hoax on the chart. A striking example of this.

Redemption of debentures Spanish China July 12, 2011. When two days before the Spanish bond issue was again to the fore, the dollar began to strengthen rapidly against many currencies, especially against the euro. If it had not happened debt redemption, the EUR / USD rate would go down further, and then it would mean a triple top, and the beginning of a downtrend. On the ensuing consequences. However, this did not happen, so the chart formed a false breakdown down. And then the further consolidation of the pair. It is also seen in other pairs of AUD / USD, and NZD / USD. In these couples was a strong rebound, with the lower spruzhinivaniem. And further movement of the steam to maximum levels.

You can then exit the market, registering a profit.

Why this strategy works on the daily charts above, and in the daytime within timeframes. To deal can always be well prepared, having carefully studied the chart, basic data, a calendar of major events. Articulate and record trading plan on paper. And then act according to plan.

Many events take place each week, which have an impact on the market, but they can move the course majors at 100 -200 points. They can prepare in advance.
But here, on intraday transactions can often take much less profit from the general dvizheniyapary than from the medium of transactions. Therefore, the transactions are themselves far more often than medium-term transactions. But the trader and errors of the total number of transactions may be greater, where more than the deals themselves. However, the essence of this strategy is not changed. So, here, within days, the strategy I have described, can also be applied successfully.

In general, I would not share in intraday trading and long-term. Since the market today can offer profits within the day, tomorrow we open the position for three or four days. A week later, should generally stay out of the market.

Example of using the trading system


Now consider an example of how to trade on my strategy.

As I indicated, to trade through the use of fundamental and technical analysis, we must first understand how a Fundamental Analysis Trading component of the transaction and the technical analysis of this transaction. For etogopodhodit in the first place, I would call the deal with currency pairs, fundamental. This is primarily the main pair.

By their behavior can be seen than not breathing market. So in the last year of two pairs, USD / JPY and USD / CHF, show that the tension in connection with the debt problems of around euro zone, as well as problems in the U.S., making the Japanese yen and Swiss franc currency havens. However, like gold. Two other couples: Australian and New Zealand dollar demand, due to high interest rates. For them as well suited this strategy. Crosses for this purpose are not suitable, because I would have called them a couple of technical analysis. Yes, there are Fundamental Analysis Trading will be on the second place, it actually in the short term is not needed. So here fits a different strategy. Talk about this another time.

Thus, the most traded pair of base pairs of EUR / USD, has an estimated 33 percent of trades in the forex market. Therefore, both technical and fundamental analysis trading to better than the other pairs. Second, the couple is having an impact on the entire market for all the other major pairs. Therefore, if trading the Australian dollar, we conduct Fundamental Analysis Trading is more difficult than the Euro, since not only the data from the Australian and U.S. data may have an impact on the couple, but also data from the euro zone could affect the movement of this pair. But this does not mean that it should be ignored. However, it is more difficult to determine which Fundamental Analysis Trading influence the development of a technical analysis of the figures, and when the course will come from consolidation, rather than on the EUR / USD.

It is for this strategy is best suited EUR / USD, especially when it comes to interest rates. In order to start trading, you need to see what combination, or some figure of technical analysis, or candle, or the wave Fundamental Analysis Trading is formed on the chart. And what a factor it has created.

A vivid example: In the first week of January 2011 is expected to improve market data in the United States, preliminary data on employment outside the agricultural sector, and as a result, released on the first Friday of January, came very encouraging for the U.S. economy. I will not name the exact figures, it is not so important. As a result of these data, many traders, both private and institutional, are starting to buy dollar and sell Euro. As a result, has been broken line support at 1.3082. And the course very quickly reached a point 1.2873. However, on Monday next week, the course turned smoothly with a gap on intraday timeframes and at the same rate went up.

Strangely, the resistance level of 1.3082 has not yet been overcome, we decided to technical analysts, traders. Therefore, to open long positions may soon. You can try with little risk of a long position.

However, if you're trading in this strategy, I immediately thought would be reminiscent of a combination of a deep cup. But this combination is, like all others do not appear so.

And, since the second week of January 2011 expected to increase interest rates for the euro zone, this combination of a deep glass - Counterweight strong argument by the Fed, the argument for its strength, more meaningful by the ECB.

Now, I think, as a member of this strategy, you understand. It remains to determine the risk and position size. And if you came at the very bottom of the cup, then the risk would be minimal in such cases. In such cases, usually the course goes much further than the top of the glass.

But how to determine where it will unfold. With the help of a technical analysis is difficult to determine where the next resistance level. In addition, you may miss a significant portion of the profits.

Therefore, here when you exit the position should be considered a fundamental factor. Specifically, what data can do, as opposed to data on higher interest rates for the euro to the course unfolded. After all, if we use a technical analysis, it would be possible to close the position at the level of 1.3510-1.3570, arguing that formed a triple top. So after all. But, she has worked. And the course went on. In May 2011 again sounded warning notes about the debt problems of the euro zone. And this is exactly the opposite argument in opposition to higher interest rates. Second, the rate reached highs last: October-December 2009. And third, note the sharp rise of the course, before its sharp decline: a combination that resembles a deep inverted glass. Technically supported by basic data describing the stopping further upward movement. Here you can and close the position by removing the profit.

In such cases, I would not be for months to hold a long position on this pair.

Better in such cases, a break from trading. And then to prepare for the next transaction. This situation I would call an indefinite, both from a technical and fundamental.

To summarize NOW
These transactions do not occur so often in the forex market.

Prior to this combination was similar in June 2010, when some central banks, Russia, Japan, and others, began to buy euros at a favorable rate 1.1870-1.1900. Then, just after the weekend obraozovalsya gap, and the course began to unfold smoothly, forming a glass.

On the face, fundamental and technical factors. In the event that the upward trend over the same problems the euro zone debt in October 2010 and began the rollback rate. If we calculate that for a year found a few deals on major pairs. I think this is enough for a profitable trade. However, if someone from traders selling within days, or holds a position of one to five days, you can also trade on this strategy, but on the hourly charts. But events were already here may be less important. And there is also easy to understand how to attack a particular news release, or statistical data appeared on the chart technical figure, wave, or a candlestick analysis, or it is not.

If not, then market participants to this event do not show the slightest interest. However, when trading intra-day timeframes, we must consider what is best considered in the European session, when trading volumes in the highest.

In other cases, the technical analysis will show a fraud. For example, at the end of U.S. session, the figure may appear to continue, as will the European session the next day, and it will be just a correction. This happens very often, because at low volumes it is impossible to move the market at such great distances.

Sometimes in the Asian session are important events pertaining to data from Australia, New Zealand, Japan and China. There also need to use a combination of technical and fundamental. But I have concluded that trade is not the time for me appropriate when it comes to intraday trading. This is suitable for residents of the Far East. For European citizens enough to trade the European session. The rest of the time it is better to rest. Only very rarely, on the weekly chart you can see a very important projected event, which will have lasting impact on the couple. But it is more suitable for someone who trades on long-term charts, as I gave an example with a pair of EUR / USD.

However, these pairs of higher risk and profit is less. Since the volume of transactions is much lower. And that is why technical analysis is much more difficult to conduct, due to different market noise. As well as false motion on the motion of these pairs is much larger than the major pairs.


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