Why are fundamentals ESSENTIAL in forex trading?
What is the thing that manipulates the market to make sure your stop loss is touched in less than a minute? Simple, Fundamentals.
Forex trading constitutes the most accessible form of trading for individuals. Low barrier entries, low commissions, forex possess everything that a young trader wants. However, content that most young traders learn from on YouTube puts emphasis on technical analysis and neglects fundamental trading.
Big institutions like central banks or hedge funds, who are the ones moving the price, always make entries depending on the economics of a state. For example, EURUSD has recently reached the historical level of under 1.00000, a level that hasn’t been reached for over 20 years, after the European Union stopped dealing gas and oil with Russia.
(see the image in the chart)
Furthermore, oil prices are closely related to Canadian currency, where increasing the price will increase the value of the currency. As the price of oil is increasing, AUDCAD is reaching historical levels of under 0.86000.
Therefore, we can clearly see that fundamentals influence the market’s direction.
We can apply fundamentals to reduce our risk as well. Indeed, we can identify risky opportunities and filter out bad trades or reduce the position size.
However, over the short term technical analysis can be a practical tool to determine price reversals or the timing of an entry. History tends to repeat itself, it is the same about markets. As a matter of fact, we can use historical market price data to forecast market movements.
In a perfect world, each trade would be the result of a mix of the two, with fundamental analysis assisting technical analysis. In conclusion, digital content to learn trading leans toward technical analysis even though fundamentals contribute to an important part of profitable trades by forecasting future market prices.
Forex trading constitutes the most accessible form of trading for individuals. Low barrier entries, low commissions, forex possess everything that a young trader wants. However, content that most young traders learn from on YouTube puts emphasis on technical analysis and neglects fundamental trading.
Big institutions like central banks or hedge funds, who are the ones moving the price, always make entries depending on the economics of a state. For example, EURUSD has recently reached the historical level of under 1.00000, a level that hasn’t been reached for over 20 years, after the European Union stopped dealing gas and oil with Russia.
(see the image in the chart)
Furthermore, oil prices are closely related to Canadian currency, where increasing the price will increase the value of the currency. As the price of oil is increasing, AUDCAD is reaching historical levels of under 0.86000.
Therefore, we can clearly see that fundamentals influence the market’s direction.
We can apply fundamentals to reduce our risk as well. Indeed, we can identify risky opportunities and filter out bad trades or reduce the position size.
However, over the short term technical analysis can be a practical tool to determine price reversals or the timing of an entry. History tends to repeat itself, it is the same about markets. As a matter of fact, we can use historical market price data to forecast market movements.
In a perfect world, each trade would be the result of a mix of the two, with fundamental analysis assisting technical analysis. In conclusion, digital content to learn trading leans toward technical analysis even though fundamentals contribute to an important part of profitable trades by forecasting future market prices.
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