trading with fundamentals is the only way to go

i can hear the groans ("Tdion is back again.... great, more bashing)

i was watching CNN the other day, and they had an FX analyst on there that spoke about the fundamentals that should have moved the price one way or the other. FUNDAMENTALS. the books.

and the price moved, just like they said.

this is so much better than a crap shoot on a chart pattern. i can hear all the jacko and jame16 people coming to the thread. "tdion, you are jealous. you've been here for 4 years and just don't have what it takes"

my response: trading patterns is just too damn risky. you are taking a short term play on what a currency pair will do at the 1/100 of a penny level. this is chaos. there is no order there.

guys are out there making a living trading price action like mike_w and mbqb11... (sorry mike, i never remember the screen name) kudos to you guys....

but i stick to my guns.... i learn fundamentals, and stay away from looking for the blueprint (or grail)... yes my opinion changed a lot since i moved to germany... but one thing remains the same, i must have reason to trade.

right now i am looking at averaging down on a short on EURUSD. i will double down if the price continues to escalate. the price shouldn't go about 1.60 because of PPP.... but in the jungle of forex, who knows what will happen a month from now (nukes, whatever)

Wow big change from you here, what happened to u in germany !!!

Maybe it was the beer festival j/k

Fundamentals definitely do drive the markets but quantifying fundamentals is the problem, there are just so many factors to consider like market sentiment and so much news its very difficult to make short term analysis correctly with fundamentals as there's just too much information to process.

So I'm assuming you're talking about long term trading and you've said goodbye to day trading.

Whats ur trading time frame and what fundamentals do you consider?

the only problem with the theory is, that the guys who release the fundamentals you rely on often have a very cool insider bankster friend who tells them what he thinks. the bankster is a shark and the massive profits only can be made by misleading the most people.

you are not the guy who writes the news and releases the fundies nor are you or everybody else out there intelligent enough (i replace intelligent enough with able to look behind the curtain) to know in which way the fundies should be understood.

if you can read charts you know how the fundies should be understood and can pretty much disregard them. trade a daily, weekly chart and there you go.

just by judging fundies you go broke if you rely on the information you should rely on.

oh- or buy/ sell 10k of a desired fx pair and hold that position until it is in profit and the understatment of the fundies played out

It's still a crap shoot but at least it's based on something intelligent! There are some great analysts on the financial news channels (ie Bloomberg and CNBC), if you watch regularly you'll get to know the consistent ones and have your favorites.

Why not use fundamental analysis for direction, and technicals for entry?

Short Eur/Usd? I've heard a couple of analysts saying we may see a move towards 1.50 in the short term and then a sell off to 1.40, apparently there's too much negativity priced into the dollar.

I agree with Dr G, news can and is often one-sided in favor of the ones who produced it. When human hands and emotions are involved, you will never get a fair deal. Which is probably why sooooo many traders rely on charts and the technicals than that of fundements. With fundements, you often have to ask yourself, "where did this news come from and is this piece of info reputable".

I think that the answer lies within white space.....what do you think pipmutt....

There's a difference between trader and investor, foundamental trading is something like a "safe" "investor-style" of trading, while the real traders buy and sell looking on market supply/demand (chart patterns, sup/res, trend, etc), and some of them (like me) don't care at all about foundamentals of currencies.

I think foundamental trading is more relaxing

But it's too much long-term, if you trade that way on a short-medium term you get burned because 50% of the time price go where supply or demand are, and don't give a f*** to what it should "foundamentally" do...

Great to hear from you, tdion. Yes, on a long term basis, fundamentals move the market. Yes, on a short term basis the market is chaos. Does anyone belive that, on a long term basis, the dollar will not weaken? This is a fairly safe bet... but the route E/U will take on the way to 1.60, 1.70, and beyond is unknown. If you have enough capital and can wait it out, you will be rewarded for focusing on long term fundamentals. I, myself, would not keep shorting up to 1.60. It is becomming apparent that the only viable choice the US has is to monetize the debt. I don't think rasing taxes to service the debt is going to fly. Of course, we could have a big fire sale and liquidate all our gold, silver, and oil storage.... but I doubt that will happen. The path of least resistance seems to be to monetize. When the world comes to grips with that reality.... well... you already know this anyway.

Have you enjoyed Germany?

Regards

haha, yep I reckon you're right, I'm always staring into space looking for inspiration



I think some of the people here who talk about the market not caring about fundamentals in the short term, or who think that fundamental analysts have some kind of hidden agenda for what they say have a lot to learn about how this market is traded by institutionals!

Nice to hear from you, Tdion.

I'll bet that after some time you'll come to a workable blend of Fundies and what you put so much time into already...no need to throw everything out from before, right?

Tdion, I don't want to diminish your efforts, but I think trading purely on fundamentals is very difficult for the retail trader. As Fugly said, sentiment is very important. It governs the way in which fundamental data is viewed, and it is as fluid as the human beings who comprise the market. One can take time to read the "books," but unless one is plugged in to the flow of information in order to gauge sentiment among real money traders, it is difficult to profit from the data itself.

This is especially true in the post-crisis market. Remember how NFP used to trade? The number would deviate > 50K from the forecast and we'd have ourselves a reliable move (barring revisions). Not anymore! Now it's exceedingly difficult to make money on that announcement. And the other news events don't really affect the pairs in any kind of lasting, predictable way. A spike here and there, and then typically the pair resumes doing what it did prior to the number. As for non-scheduled news that may potentially impact currency prices, it is just too hard to discern what trade to take. Again, prices may be impacted for a short time immediately, but it takes a while for the market to fully digest news, and sentiment is continually in motion.

Bill Lipschutz, a discretionary-fundamental trader (and arguably the best currency trader of all time), has stated that he and his people are constantly talking to bankers and traders in order to gauge what is moving currency prices. He's also stated that he never sleeps. I don't think it's realistic to think that we can even come close to what he knows at any given moment, trading with a DSL line from the comfort of our one-bedroom apartments. I think learning about fundamentals and their impact on the markets is a very interesting pursuit, but IMHO it's an academic one. I think retail traders are better off just following the price action and trading on that basis, FWIW.

“The Big Board


. . . It was about an Earthling man and woman who were kidnapped by extra-terrestrials. They were put on display in a zoo on a planet called Zircon-212.

These fictitious people in the zoo had a big board supposedly showing stock market quotations and commodity prices along one wall of their habitat, and a news ticker, and a telephone that was supposedly connected to a brokerage on Earth. The creatures on Zircon-212 told their captives that they had invested a million dollars for them back on Earth, and that it was up to the captives to manage it so that they would be fabulously wealthy when they were returned to Earth.


The telephone and the big board and the ticker were all fakes, of course. They were simply stimulants to make the Earthlings perform vividly for the crowds at the zoo--to make them jump up and down and cheer, or gloat, or sulk, or tear their hair, to be scared shitless or to feel as contented as babies in their mothers' arms.


The Earthlings did very well on paper. That was part of the rigging, of course. And religion got mixed up in it, too. The news ticker reminded them that the President of the United States had declared National Prayer Week, and that everybody should pray. The Earthlings had had a bad week on the market before that. They had lost a small fortune in olive oil futures. So they gave praying a whirl. It worked. Olive oil went up.” - Kurt Vonnegut

how is this any different when person watching a TECHNICAL analyst doing his analysis on forex..and poof..the chart moved in his intended direction.

people make money using both types of analysis.

when the fundamentalist is right..they say his analysis is spot on that's the REASON why price moved.

but when a technical analyst is right..it's just concidence..

bah!

The picture attached is a very general correlation summary. Those who are into fundies should be familiar with it. As for me, i combine both technical and fundies. I use fundies to get the probable trend and technical for both my entries and exits.

http://img2.imageshack.us/img2/4701/73092209.jpg


The stocks monitored are according to the sessions.
Asia - HSI, Nikkei, ASX
Europe - DAX, CAC, FTSE
US - DJIA
DJIA is the anchor.

The anchor commodities are oil and gold.

Up to now, the low yield currencies (safe haven) are USD and Yen.

Again, this is just a brief way to look at things. Example, high yield currencies such as Euro are also driven by their own economic releases. But when the released data are according to the current risk cycle, it certainly creates a massive impact in terms of momentum.

My opinion is that both technical and fundies are useful depending on how the trader applies them in his or her trading plan.

Nice to see you back....

How about 'trading on material Information' is the only way to go'? My current stance on TA is 'Maby for picking an entry'.

In the past I was kind of shocked about your aproach to the markets, It didnt seem to fit with your persona; as far as I could tell. This is more like it.

I still havent proven that I know shit, so take what I say as, well, not quite shit, but my *Current* opinion.

If youve got the funds, why not Invest in Reuters. I would if I could.

Leon

The issue with trading fundamentals is that price really doesn't care what the fundamentals are. What I mean by that is that even if I somehow KNOW for certain exactly what the fundamentals affecting a market are... the market price action really doesn't care as it's made up of a whole bunch of traders who trade based on a mixture of technicals, fundamentals and everything else under the sun. Besides using fundamentals... traders hedge, scalp and speculate based on intuition, hunches, blind gambles, messages from space etc. All that trading affects price action in ways often very contrary to what the fundamentals say should happen.

While you may absolutely 100% know the fundamentals... you had better have deep pockets and be able to wait out the inevitable potentially huge gyrations of the market while those fundamentals become the true driver of the price action.

If fundamentals were the only thing that mattered... there would be no market. Numbers would be released... the market would instantaneously adjust to that new level and sit there until the next all important fundamental number was released. There would be no movement in between.

Fundamentals are only one part of the matrix of trading and market influences. There are very likely as many fundamental traders who get their fundamental point of view wrong as there are that get it right. Fundamental trading isn't necessarily a golden path to riches.

As an example. Let's say a market is at 1.40 and our fundamental view is rock solid. We KNOW the market is going to 1.60 within 6 months based on our fundamental analysis. We absolutely KNOW this will happen. So what do we do... place a trade and then watch for 6 months as the market trades between 1.25 and 1.40... only to end up at 1.45 6 months later because of new fundamentals that weren't apparent 6 months earlier.

We were correct based on our earlier fundamental point of view... the market bounced around and temporarily corrected anyway... because of technical traders, hedge fund activity and a myriad of other chaotic influences. Finally the market started heading towards our target until new fundamentals caused our original target to look overly optimistic.

Fundamental trading is a valid methodology. Arguably probably even the most logical methodology... unfortunately the markets aren't always based on logic and don't follow a predestined order based on those fundamentals.

Hi Leon

Why bother with Reuters or Bloomberg terminals when there are some excellent analysis available for free from people like Hans Guenter Redeker (BNP Paribas) and Jeremy Stretch (Rabobank), these guys have an army of top fundamental and technical analysts at their disposal plus they're players in the market so they know what's going on.

For example if you'd followed Redeker's analysis since October last year he's been extremely accurate, especially for Cable!

Time is of the essence, its a given that these guys will only release their views once they have opened their positions. Dopey opened a thread that described this kind of thing, by the time an analyst has released his outlook then the majority of players have already made their move.

If you can come come up with the same trade idea before the analyst opens his mouth, then he's to thank for your profits, sinse the ones who paid attention to his analysis are pushing price's in your favour.

It's interesting the different perspectives on this topic.

I'm a day trader and make almost every decision based on how price reacts at given price points.

With fundamentals the variables overwhelm me.

I've also noticed that when price moves the opposite direction of what the fundamentalist prognosticate... they come up with some serious horseshit on why they were wrong.

When a trade goes against me I don't need an excuse... I just tell myself... damn... the market was really wrong there.

Do what works and be smart enough to know if it ain't working... try something else or stay out.

I gave up thinking a long time ago... now I just watch and react.

The most important facet to longevity in this game is risk management... traders don't want to hear that because it's not sexy or because they think they know better.

A great risk manager can be an average trader and make money. If a great traders is a poor risk manager his days are numbered. The math doesn't lie.

Trading is a learned skill... like anything else... not something that happens overnight no matter what strategy you employ.

Tom. I've always admired you and your scientific approach. There's nothing wrong with trading with fundamentals, it's what Jim Rogers does and he's made a few bucks. But to follow any analysts is folly. Just google Philip Tetlock. He's a scientist, I'm sure you'll be interested in what he's found out.

Per my other post, the question is simple. Are you a zookeeper or an inmate?