Fundamentals in Forex

Discussion in 'Forex' started by Miron, Dec 10, 2008.

  1. Miron


    Good evening,

    This is a serious thread, folks.
    I am far from being a pro trader in regards to the Forex market but not so long ago, when I glanced at fundamentals, I could find some ways to enter into a trade on a regular basis. I don't know why, and that's why I would like your seasoned opinion btw :) but it's been a few months that fundamentals are absolutely of no use.

    I mean, I could take hundreds of examples but let's try with the following:

    Yesterday, bad news from Switzerland (higher unemployment rate, seasonally-adjusted or not) and to top it off, better-than-expected news from Uncle Sam on the housing front... well ONCE AGAIN, the franc got on a crazy up ride in the afternoon.

    It's JUST one exemple but on the majors, it's happened over and over again in the past few months, be it the yen, the franc, the pound or the euro. Can some Forex experts, pro or seasoned amateurs, explain me here (or in private) what's going on?
    How come fundamentals have been of no use lately?

    What am I missing as an analyst?
    I know, some are thinking: "wtf, trade the trend, you don't care as long as you are profitable, buddy"

    Well, no actually, I like using my brain and usually it works out pretty well, what am I missing these days, that's why I would like the opinion of some fundamentally-oriented or technofundamentalists about all this.

    Thanks very much in advance for your answers.
    Private answers (if the thread becomes a mess) are welcome :)

  2. Miron


    Hi again,

    No answer for now. Does it mean that everyone here relies solely on technical analysis? Any comments by the experts of the forum, such as Ivanovitch and the likes are welcome, obviously :)

    I can hardly believe that all the Forex traders down here don't care at all about what is going with the fundamentals and the news feed of the currency market.

    I mean, once again, I'm NO beginner and last week, I made 7 pips, 6 pips today, 2 trades 2 winners (and far better on the equities market with +13% in the past 2 months and some great shorts in oil stocks and Apple over the course of 2008) but this type of trading... it does not click for me, it's just technical analysis.

    Consequently, I would have to get some serious feedback from some fundamentalists and techno-fundamentalists on the reason the FA doesn't seem to be working these days. What is the BIG picture I am missing for a bunch of months? Ivanovitch? Another expert of this forum?

    Thanks very much for your explanations, folks.

    P.S: As mentioned previously, if some of you would rater discuss the topic in private (or exchange ideas) for whatever reason, please feel free to do so.
  3. Miron


    Again, I'm not trying to bash technical analysis in any way, I've been using it for 10 years and love it :)

    But the biggest flaw of it, if you ask me, is the fact that when you trade that way, you are a FOLLOWER, no matter what... you don't use your brain and you let the big guys tell you WHAT you must do.

    Personally, I prefer to rely upon my knowledge and my thorough analysis as to when or what I want to trade.
    THAT, to me, is the major flow of technical analysis, you are basically a follower.

    And that's why I meant my post. Looking forward to reading your comments, ideas, suggestions about this topic. If you haven't figured it out just yet, I am pretty lost on the CCY market presently LOL
    I promise, I'll keep it shut now, back to you :D


    P.S: Ivanovich, sorry for mispelling your name, Sir :)
  4. Fundamentals are definitely worthwhile in forex, but if you're a typical equity trader and trying to apply the same thought process to forex, I think you'd have to take a much longer term when it comes to "fundamentals".

    Data releases cause significant movement, especially when they surprise. But forex in the short term is driven more by orders, hedging, flows, etc. In equities, you've got buyers and sellers - both speculating on price direction. In Forex, you have that, but you also have banks that need to do custodial transactions for their reserve fund, companies that need to acquire a particular currency for a merger or for some hedging, etc. These things are outside of the realm of fundamentals as you're probably used to them.

    If you're going to play daily, then you need to get your technicals down. If you're going to make forex trades for a longer term (like I do sometimes) then you can pay attention to fundamentals.

    Lastly, these past two months or so are atypical to the last 6 years. It could be that things are changing to be this way going forward, or it could just be a market turmoil blip. We'll see.

    Hope that helps.
  5. Miron


    Hi guys,

    It looks like there is a huge majority of technical analysts in this forum :p Anyways, here comes a scenario I would like you to work on:

    Scenario: a BIG merger is announced, it hits the headlines all over the place, "a U.S company wants to buy an English one"

    With your experience, is it a good call to buy the gbp/usd?
    If so, what is usually the time frame? Upfront or it may take a few days to work out?
    Or is it just rubbish in your view?

    Thanks very much.
  6. Most of the time the company that is buying the other will have conducted a good deal of their foreign currency buying before the announcement to get a better price. They're not going to wait for the announcement to drive up the price of their purchase need. But it will move price regardless - as other speculators like yourself tend to move in that direction.
  7. Miron


    Good afternoon,

    120 people read this thread... only ONE answer from the moderator of this forum... I knew that TA was trendy but not that much :confused:
    Well, if some seasoned traders/analysts are disappointed with the lack of attention this thread has drawn and they want to SERIOUSLY talk about fundamentals or techno-fundamentals in the Forex market, please don't hesitate to send me a private message. I mean, the CCY market is the only one I haven't made good money from and this is gonna change! :)

    If some want to analyze the foreign exchanges from a fundamental stanpoint in private, I'm on. Likewise, if some of you know some forums/clubs with skilled fundamentalists I may discuss with, thanks a lot in advance.

    For the rest of the "technical crowd", I won't annoy you any more, no worries.


    P.S: Thank you Ivanovich for your feedback, much appreciated.