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Fundamentals, Technicals, or both? 2 replies

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Technicals Vs. Fundamentals?

  • Post #1
  • Quote
  • First Post: Feb 24, 2016 5:44pm Feb 24, 2016 5:44pm
Do you agree that

  1. All known market information about supply and demand, can be found in price chart, making fundamentals irrelevant?
  2. Because all known market information is already factored into price, you are effectively trying to predict the future, and the events that will occur in it, if you consider fundamentals?

Alternatively, do you agree that it is important to understand/consider the fundimentals behind the asset you're trading?

Why?

All market information is not known on a chart. For example when quantitative easing was introduced - it took traders a year to understand what was going on.- Now a mention of it by central bankers will have an immediate effect on price.

Understanding fundamentals means that you are ahead of the game. Suppose you have two currencies - one strong - the other weak and there is some poor data that effects the strong currency -that comes out. There is a sell off against the strong currency-but if you know fundamental of the currencies you'll know that it might be a good time to buy the strong currency- and sell the weak one. However, into this mix you need to be aware of market sentiment- are there geopolitical factors affecting the currencies- eg- Brexit, political uncertainty, flights to safe haven currencies-plus any major news events (interest rate announcements, GDP, CPI, speeches etc...)

When you have all this weighed up - then you are making your trades from one of knowledge of why the market should move- and not a pattern on a chart
as far as fundamentals go... Its good to know current interest rates of the currencies. And if its in a hiking cycle or cut cycle..

But technicals are way more important. for short term trading.

Too many people are over thinking the Fundamentals.. and Not focusing on the technicals.

A lot of people saw the monthly spike in ucad coming.. they saw the spike in the dollar coming... They saw the drop of the euro coming based on fundamentals..
But may take months for it to start kicking in and actually happening...

When you know technicals... You know when its starting and where you can minimize risk in entering...
All the good traders I know are Highly focused on technical levels that will provide a good risk/reward trade... And they don't over do the Fundamentals.. Profitable Traders that I know don't analyse every bit of data that comes out, but they are looking at every technical level!
The only system that will work is one designed by and for yourself.
There is only one thing that causes price fluctuation. Buying and selling. There is nothing else. All fundamentals are trying to do is (ineptly) describe WHY one or a group of people might choose one (buying or selling) over the other. Technicals are trying (ineptly) to determine WHERE (at what price) and/or WHEN one or a group of people might buy or sell. Neither of these methods is consistently successful over the long term.

From the many threads you have started asking these kinds of questions tells me you are reading some very old books on economic theory or are taking a beginning economic course. Markets and price fluctuation do not follow any "rules". It is simply an expression of those who are participating in the market at that micro-second. The very next moment that will change. Is it "predicting" the future... Yes if you are using any of the above mentioned methods to participate. However there is a better way. But you will need to put down those books and stop listening to what others say. You must start the very long and arduous process of observation, theory development, theory testing, and statistics gathering. Do it long enough and you will come to "see" the order flow underneath those graphs and charts. Then the light will come on. You don't predict the future... You only "ride" a temporary imbalance in the order flow that causes price to move. When the price stops moving, or in other words when the order flow finds balance again, you exit. If the order flow is opposite to your trade, you exit.

It's not complicated but it IS time consuming.
Do more of that which succeeds and less of that which does not - Dennis Gar
  • Post #5
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  • Edited at 2:48am Feb 25, 2016 2:26am | Edited at 2:48am
Quoting Ponzi Jr
Do you agree that All known market information about supply and demand, can be found in price chart, making fundamentals irrelevant?
No, and in this day and age I don't think you'll find many long term profitable traders who agree with that. All the successful traders I know of, at the very least know enough to avoid betting against shifts in monetary policy.

Quote
Because all known market information is already factored into price, you are effectively trying to predict the future, and the events that will occur in it, if you consider fundamentals?

Yeah it is trying to predict the future but it's educated guesses. If unemployment drops, more people working, I can guess that retail sales and housing starts will go up in the future. If producer prices go up, I can guess that inflation will go up in the future. And if inflation rises, while GDP is growing, I can guess that the central bank will tighten its policy.

Quote
Alternatively, do you agree that it is important to understand/consider the fundimentals behind the asset you're trading?

To me it's the most important thing of all. The technical systems I trade are very, very simple trend following systems which don't really provide an edge in of themselves - the edge comes in reading the fundamentals, knowing when the underlying value of an asset is likely to change, and applying the right system at those times.
si hoc legere scis nimium eruditionis habes
Nobody gives a s*** about technicals.
Markets and prices are moving. You either jump on the bandwagon or not.
Only fundamentals or news can be helpful sometimes.
I talk about this in other posts, but such a key to being successful in this game can come by combining fundamentals and technicals.

It's more of knowing what to look for in each, than simply trying to consume all the information available. Something fundamental which most retail traders don't get is that trending markets, in FX, are almost always there because of central bank policy. Their forward guidance which comes part of their Rate Statement tells you their intentions for the interest rate in the future. When this changes, such as they introduce a bias to lower interest rates, that currency immediately flips to the weak side. And it can be seen in charts.

If you take a look at NZDUSD from 29 April 2015, you'll notice a clear downtrend started. It took us from around 7650 to lows of 6250. This was caused by a shift in central bank policy from the RBNZ. Their rate statement released on 29 April stated that they were looking at the possibility of easing.

This happens for all currencies. NZD, AUD, CAD. In fact the Bank of Canada actually stated on 20 January 2016 that their economy was coming out of the problems faced by the lower oil prices and the current interest rate was fair. This was much more positive (hawkish) for the Canadian dollar compared to before when there was an easing bias, as well as the continued rout with oil. If you look at USDCAD, NZDCAD, AUDCAD, GBPCAD after this, you can see the trend reversed in favour of the Canadian Dollar.

Granted this is looking at a bigger picture but applying these can help you to get the direction, then wait for sell signals in that direction, such as bounces off of resistance, pin bars, outside bars, whatever your method. Extremely high probability and usually a fantastic risk reward scenario.
Quoting DonPato
There is only one thing that causes price fluctuation. Buying and selling. There is nothing else. All fundamentals are trying to do is (ineptly) describe WHY one or a group of people might choose one (buying or selling) over the other. Technicals are trying (ineptly) to determine WHERE (at what price) and/or WHEN one or a group of people might buy or sell. Neither of these methods is consistently successful over the long term. From the many threads you have started asking these kinds of questions tells me you are reading some very old books on economic...
very well said 👍🏼
Pecuniae obediunt omnia
To put it simply Fundamentals is what drives the markets and technicals are used for entry and exit points.
20 Pips a day keeps centerlink away
Technical analysis and fundamental it is certainly different. But on the other side the sky and the earth are different components of the whole too. Is it possible to consider one or the other if they're indivisible concept? One affects the other and vice versa. Plus not all factors can be taken into. Plus there are fundamental factors which are considered min for example to contain inflation.
Technical analyze. People different and traders mindset also different. There are so much trading strategy exist and much more will appear I believe... But majority of these strategies are based on tech analyze. And it's right. Usually it's really profitable for short-term trend.
I haven't tried use much fundamental analyze - to many variables and it takes more time.
Fundamentals that you read about are typically useless as the market has already discounted the price, and I call them "funny-mentals." However, if you catch on early, before others believe, then you might have valuable "surprise-a-mentals."
Quoting PIPot
very well said 👍🏼
Thank you friend
Do more of that which succeeds and less of that which does not - Dennis Gar
Fundamentals rarely matter except on some occasions. Most of the times it is about orders. You would still do well ignoring fundamentals provided you already have an edge of course.
Quoting Atokys
Fundamentals that you read about are typically useless as the market has already discounted the price, and I call them "funny-mentals." However, if you catch on early, before others believe, then you might have valuable "surprise-a-mentals."
not sure why you keep quoting funnymentals in every single one of your posts. are you trying to be funny or are you actually mental? you dont even trade so i dont see your purpose here. please leave this to the professionals.
Quoting numbnuts
{quote} No, and in this day and age I don't think you'll find many long term profitable traders who agree with that. All the successful traders I know of, at the very least know enough to avoid betting against shifts in monetary policy. {quote} Yeah it is trying to predict the future but it's educated guesses. If unemployment drops, more people working, I can guess that retail sales and housing starts will go up in the future. If producer prices go up, I can guess that inflation will go up in the future. And if inflation rises, while GDP is growing,...
Quoting Supertrader9
Fundamentals rarely matter except on some occasions. Most of the times it is about orders. You would still do well ignoring fundamentals provided you already have an edge of course.
Lol.
Forex Trading for the Savvy Beginner
Quoting nubcake
{quote} Lol.
LOL. "Fundamentals rarely matter". That was funny.
Maybe i should clarify by rarely matter i mean the reports had already been leaked to those on the inside long before we peasants get it except on some occasion. Fundamental trading would work if you are in the circle, if not then it is a futile endeavour. It is better to find other ways. I am speaking for short term trading. If you hold trades for a few years then it might be different but i only hold trades for a few hours.
Quoting Supertrader9
.... the reports had already been leaked to those on the inside long before we peasants get it except on some occasion. Fundamental trading would work if you are in the circle .....
News reports don't get leaked to anybody ahead of time, that's a myth. Believed by people who almost certainly believe a whole lot of other crap too.
si hoc legere scis nimium eruditionis habes
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