This is something I've been wondering since I started trading. I remember a guy telling me a while ago, actually a few guys telling me that they didn't bother looking at the Fundamentals because by the time the outsiders find out about it, that information has already shown up in the prices. I see what they mean because every time some fundamental news is reported, its always after the fact. Don't get me wrong, I fully understand that government reports, political events, natural disasters, etc. can move a market and blow through a T/A system. What do you all think? What's the consensus on this subject? P.S: Trolls, get a life.
TA works. TA doesn't work. Indicators work. Indicators don't work. Fundamentals are great. Fundamentals are useless. Like anything else it depends on the skill and knowledge of the trader. I trade intraday off very short term charts and use fundamentals, but that's mostly because one of my colleagues is an ace at using it to identify changes in market pressure.
Fundamental analysis is useful , unfortunately market is efficient and most of it is priced in.Use it and use 4 hour charts to time entries when the fundamental analysis is correct.Markets can remain irrational longer than fundamental traders can remain solvent. Example a trader was long 10,000 ounces gold based on fundamentals at $330 , eventually he sold out at $260 at a whooping great loss.
Trading or investing via fundamentals is similar to trading using discretionary methods. You'll get it right some of the time and wrong most often the time. The brain can only handle a certain amount of info and your memory needs to be very sharp. XYZ Co may be a brilliant Co. but if outside influences come into play, eg they have an accident or incident or they lose a large contract, you'll be the last one to know. To trade fundamentals, one must know the Co. intimately eg as an insider. Trading / investing successfully is fraught with twists and turns, if I knew what I know now 20 years ago I wouldn't have started.
Fundamental analysis is questionable, but fundamental data used in a more technical way (noise filtering etc.) are used by some CTAs with a goal to diversify trading models.
I make money by betting how fundamentals will affect the market longterm. Doesn't help me much on a daily or even weekly basis. If I am trading against what I think are the fundementals as I understand them, I still make money, but I am aware I am going against what I beleive. And then I tend to be a little more nervous and attentive and a little less stubborn and quicker to take a profit. I use to daytrade ES. At the time ES was in a longterm bear market. In retrospect, even though I only held a few minutes or a few hours, I wish I had just scalped from the short side. the best NQ trader I knew simply scalped based on the 50 over 200 ma. Now that's not fundamentals, but it is about the time frame it takes for fundamentals to play out. I heard on tv, the largest oil trader at the nymex got burned because of his belief based on fundamentals as he interpreted them was that crude would never again trade below $90
There are few journeys: I. Pure fundamental analysis (e.g. regression models -- mostly waste of time); II. Fundamental inputs into technical models (e.g. commitment of traders for futures; level of inventories for specific markets -- quite promising); III. Long-term trend following on basket of markets (argument goes that the long-term trend-followers receive an insurance premium from hedgers -- proven method profiting "indirectly" form shifts in fundamentals).