Tuesday November 22, 2011 19:12
Fundamental Analysis And Its Place In Online Trading
Posted by Pro Trader as Fundamental Analysis
All Forex trading articles always include two large sections: fundamental and technical analysis of Forex market. According to our researches, we came to the conclusion that it is necessary to know about the fundamental analysis, but its role in successful trading is not important.
Let’s discuss the features of fundamental analysis. The main target in fundamental analysis is to foresee new direction in price movements. Life cycles of the fundamental factors can be divided into short and long. Short life cycle of the news lasts no more than a day and includes all unforeseen economical or political events. Sometimes this news is associated with force majeure like earthquake, terrorist acts, etc. Long term cycle takes place from several weeks to several years. Fundamental factors of long-cycle are all factors that influence the global and national economy situation (inflation, unemployment, etc).
The majority of the traders of Forex trading in Singapore are speculators. It applies to both small traders and banks. The main distinction between a speculator and the investor is the duration of time he/she trades in the market. If you have bought EUR in February and sold it in May – you are an investor. But there are no a lot of traders like that. The majority of Singapore Forex traders make executions within days or maximum within a week. Hence, the fundamental factors of long life cycle for such traders are not very important.
As for the fundamental factors of a short life cycle, it is still difficult to see their importance. If it comes to natural disasters, you need to be quick enough to open a trading position in a precise moment, because in most cases you will miss the moment. Regarding anticipation of news, it also looks difficult. As an example let’s think about the unemployment rate announcement in USA. If the news coincide with the predicted value, it is unlikely that the USD will change. Means that you will have a trading opportunity only when the news doesn’t coincide with the predicted data.
Fundamental analysis will not let you decide when to place a trading position. Taking decisions basing only on fundamental analysis is very difficult, as you have to manage a huge volume of information. Also it will take you much time to study all reports, news and briefs.
To sum it up, on our opinion a trader has to have a good economical calendar of the biggest economic events to trade Forex in Singapore, but only for avoiding opening a trading position before the announcement of big and important events. Because the big announcements may cause a high volatility in Forex market and your trade may be closed by stop loss before the market chooses any direction.