A Brief Guide to Trading the EUR/USD – Chapter 5: Fundamental Analysis for Trading EUR/USD

This is chapter number 5 out of 7. Read the rest:

Read A Brief Guide to Trading the EUR/USD – Chapter 1: An introduction to Forex
Read A Brief Guide to Trading the EUR/USD – Chapter 2: The EUR/USD currency pair
Read A Brief Guide to Trading the EUR/USD – Chapter 3: Reasons for trading in Forex
Read A Brief Guide to Trading the EUR/USD – Chapter 4: Forex Quotes

Nowadays, Forex traders have an abundance of information to refer to when making their investment decisions. In certain cases, there is an information overload. The market movements are normally dictated by two factors, Fundamental forces and Technical forces.

Fundamental forces refer to matters like a country’s balance of trade, interest rates, GDP report and other Macro economic data. Although, many Forex traders recommend trading based on fundamental analysis, this sort of trading is not highly recommended for those who are new in the Forex market.

It is also extremely time-consuming as most fundamentalists need to be in tune with the market constantly, that is, “Always on”. You have to be quick to respond as soon as a news report hits the wire. Otherwise you will find yourself lost in the dust of the action. The market is constantly receiving news update from around the globe and thus it is always reacting to the news every minute.

It is not important to know the underlying reason for the data or news received. However, you need to be able to understand how a market will react to a particular data or news that comes through the wire. In addition, most of the Macro economic data are actually forecasted or best guess estimates. Releases of Macro economic data are just to confirm all the estimates or forecasted projections. Thus, it is more important that you catch the “timing” of the releases than understanding the underlying reasons for any particular projections.

An essential tool for any fundamental trader is a comprehensive economic calendar. You can find one such calendar at http://www.fxempire.com/economic-calendar/. Apart from an economic calendar, trades should always be on top of all global news thus it is also essential that you have a regular and updated news feed like http://www.fxempire.com/news/ to provide you with all the current news. 

Read A Brief Guide to Trading the EUR/USD – Chapter 6: Technical Analysis for Trading Forex
Read A Brief Guide to Trading the EUR/USD – Chapter 7: Conclusion