In intraday trade if the news is reflected in the prices ... So what is the fundamental analysis for?
news trading is for high speed traders, not for the average trader. You take action immediately the news got released on Bloomberg terminal.
The basic theory is that the market will move on the news and settle at reality. The FOMC move today was stereotypical. The news ran it high, 2936.00 at 200 est and was lower within an hour or so. Buy the news and sell...is the saying. Had severe merit today, study the ES from 200 pm est today. picture paints a 1000 words. EX
These are days when it is sometimes better to do nothing. You never know how operators will react to the news.
But like you said, their reactions are reflected in the prices. So I trade based on technicals, having come to the conclusion that if one makes trade decisions based on a solid understanding of typical price action, the fundamentals are sort of baked into the cake.
I don't do any fundamental analysis, though I believe FA is the vital factor in long-term price movement. I assume that the professionals employed by the biggest banks in the game will be better at FA than I am. Their employers will then act as appropriate on their analysts' recommendations. Because they are such big players, this will make price either rise or fall and both represent a visible opportunity to me, so I can either buy or sell depending on what price is doing. Do I really think I can do better FA than the world's best FA professionals?
So if all information is all truly reflected in the price then why are you trading in the first place, logically it amounts to gambling and a 50/50 wager (actually a losing proposition when factoring in costs of execution) when you make the assumption that all information is contained in the price already.
That is nonsense. So you are claiming news/releases of any kind get absorbed instantaneously but a moving average crossover is tradable?
I knew it, so it again basically comes down to technical vs fundamental? If by any yardstick you should probably lend a lot more credibility to fundamentals than technical factors. When I say fundamentals I include news of course as well. Anything that is not derived from a price of the asset itself or a derivative thereof. I can give you a simple example that proves my point: Take a merger bid announcement for example. The initial price reaction to such news may not be tradable because it may be outside of trading hours or the price instantaneously reflects the news. However, those attuned to news and fundamentals have the clear edge in all subsequent trading matters over someone who just stares at prices like a goat. Think of competitors joining the bid, regulatory announcement surrounding the merger bid, politicians weighing in, then of course also when international mergers are concerned at some point the cash portion of the merger price has to be converted from one to another currency and the timing of such and size of such conversion can impact currency markets as well and such moves are definitely not fully priced in at the initial merger bid announcement. I will never understand those who dismiss fundamental factors altogether. Makes zero sense. Some technical factors may contain value but you also do not look at the rain that is pouring down in your backyard and from that make an estimate whether it will continue to rain and for how long. You look at the wind direction, wind speed, and forecast rain not just as it happens but where it originates from and take into account all variables. Those who claim technicals is all they need have never provided a single piece of evidence that it works for them. Always the age old excuse "I owe nobody an explanation or proof", "what does not work for you does not mean it works for no one". Well, it kind of does not work for anyone, else wallstreet, hedge funds, private equity, and all other operators would salivate all over technicals and look at nothing else. That is proven not to be the case. This should lead any logically thinking person with an IQ above 100 to one and only one conclusion: That technicals alone have no predictive power, which means, they are useless in isolation. Some may reply "ok, not just technicals then". Well if not just technicals that means such person also takes into consideration fundamentals. Which is exactly my point.