What is the best way to learn the fundamentals? | Forex Factory

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What is the best way to learn the fundamentals?

  • #1
  • First Post: Nov 12, 2012 11:01pm Nov 12, 2012 11:01pm
I've been trading with the technicals for a year now and all is pretty good but I now want to get to grips with the fundamentals - and not just news announcements but the whole picture. Other than going back to uni to study economics what would be the best way to go at this?
  • #2
  • Nov 14, 2012 5:10am Nov 14, 2012 5:10am
I think spending money to learn the basic concept of trading is a waste of money and time.
the best ways to learn forex trading is to read the ebook gratruit online, watch youtube video, read the article on blog, forum and actively participate in trading.
for me it is the best ways to learn the fundamentals
  • #3
  • Nov 14, 2012 6:26am Nov 14, 2012 6:26am
In my perspective, the best way to learn the fundamentals is studying the impact of the important events (red flag). With time, you'll be able to undestand that impact and take it into account in your plan.
Also, take a look at babypips. I think that site has good explanations about both technical and fundamental analysis.
  • #4
  • Nov 14, 2012 6:30am Nov 14, 2012 6:30am
Quoting richhand
I've been trading with the technicals for a year now and all is pretty good but I now want to get to grips with the fundamentals - and not just news announcements but the whole picture. Other than going back to uni to study economics what would be the best way to go at this?
that is exactly why people cling to technicals......IGNORANCE, LAZYNESS....thinking a pattern or some sort of magical formula, some sort of chart formation is going to be their edge.


IT IS GREAT YOU ARE ACTUALLY WANTING TO PUT THE EFFORT TO UNDERSTAND MARKET FORCES.

learn Macro economics
quantitative finance
mathematics
statistics
finance
and whatever financial instrument you are trading keep up with all that affects that instruments from fiscal policy to monetary policy, politics etc.

it is hard work to actually learn about trading .......good luck my friend
AVT INVENIAM VIAM AVT FACIAM
  • #5
  • Nov 14, 2012 6:45am Nov 14, 2012 6:45am
Quoting CindyXXXX
Hm... A fantastic question by an even more fantastic trader or shall we say tradeee or tradeth. We really are missing you over at the Graham Boss Ranger thread but anyway, I guess we all have our vices. If you re consider your tiff with She_Trader987 then we would be glad to have you back. For what it's worth I know you're innocent.

I think we got a little carried away there for a minute, one brother passing bro gestures right and left when one way looked the other but you know.... As I laughter out louderh... yes you
Know and now I wink at...
holy crap...Cindy has been replaced by a medieval dude
AVT INVENIAM VIAM AVT FACIAM
  • #6
  • Nov 14, 2012 7:15am Nov 14, 2012 7:15am
the redlion
Quote
that is exactly why people cling to technicals......IGNORANCE, LAZYNESS....thinking a pattern or some sort of magical formula, some sort of chart formation is going to be their edge.

As someone with over 30 years in finance, business and the markets, I respectfully disgree with your characterization of technicals and the people that used them to trade.

Fundamentals hinge entirely on speculation. Although they clearly effect the markets, they are subject to wide interpretation. If they were not, we would not need the likes of CNBC, Bloomberg and other financial information outlets. These sources owe their existence to the opinions of their “experts” that consistently debate opposing viewpoints; their interpretation of the data generated by the fundamental variables and how it will affect the market. Furthermore, beyond our resources, there may be inside information or other factors we are unaware of that will influence the outcome of the news. Without this additional information, it would be ridiculous for us to speculate as to the market’s behavior. We would never have enough information to create an edge, so trading purely on fundamentals is not wise because the risk for most of us too great and unacceptable.

Fundamental trading requires supporting/defending one side of an argument whereby one side will always lose. As technical traders, we are only interested in what the results are, not why. We can observe the market’s reaction to fundamental data, but we react with a technical approach. We know that news and other economic factors (fundamentals) may move the markets, or not. We never know to what degree or in which direction the market will react until we actually observe the outcome using our technical analysis. How often have we thought the market should do one thing based on fundamental data, and to our minds, the market’s reaction was totally the opposite? How often have we found that there is really little correlation to news and the market’s reaction to it?

Fundamentals clearly drive the market. That premise is not in dispute. However, it is virtually impossible to formulate a trading system or plan based on fundamentals because they do not produce repeatable results or consistency. We need to be aware of the news, but we should never assume we know how the market will react to it. Unless you are controlling the resources of a global invesment bank that has access to "inside" information, fundamentals are meaningless to most traders at this level.

I have inquired about and never been shown any example of a fundamental trading plan or system that can produce any consistency or repeatable strategy for profitability.

I assure you, all of the successful technical traders I know are very profitable and are not ignorant or lazy. To the contrary, they are seasoned professionals that outperform by a longshot most prop room and institutional traders often with much greater informational resources at their disposal.

We all will believe what we choose, but for most of the people in these chat rooms and forums, your assessment of what is required to understand the markets via fundamentals is unrealistic. To understand and apply the subjects you've listed for most people would require a lifetime of work - I know because I've spent my time trying to know it all. I came to the conlusion a while ago that there is just too much conflicting information and I do not have access to it all. So now, while most fundamentalists are speculating and wondering why, this technical trader is taking profits and not caring why.

Just another perspective.

All the best.

dcginc
  • #7
  • Nov 14, 2012 8:14am Nov 14, 2012 8:14am
Quoting the redlion
that is exactly why people cling to technicals......IGNORANCE, LAZYNESS....thinking a pattern or some sort of magical formula, some sort of chart formation is going to be their edge.


IT IS GREAT YOU ARE ACTUALLY WANTING TO PUT THE EFFORT TO UNDERSTAND MARKET FORCES.

learn Macro economics
quantitative finance
mathematics
statistics
finance
and whatever financial instrument you are trading keep up with all that affects that instruments from fiscal policy to monetary policy, politics etc.

it is hard work to actually learn about trading .......good...
I also disagree, I've studied all those things at university and they have been fairly irrelevant to trading. Macro helps, but it won't make you a trader.

Even if you understand the fundamentals, does it mean everyone else will see things the same way? What is the market pricing in that you don't know about? It's really no less gambling than trading pure technical analysis, though it's good to have some knowledge so you aren't completely blindsided.

I can see buying/selling strength on a chart, often when the fundamentals appear to support things going the opposite way - I will always take the technicals, because it is less subjective.
"Don't Panic..."
  • #8
  • Nov 14, 2012 9:12am Nov 14, 2012 9:12am
Quoting dcginc
the redlion

As someone with over 30 years in finance, business and the markets, I respectfully disgree with your characterization of technicals and the people that used them to trade.

Fundamentals hinge entirely on speculation. Although they clearly effect the markets, they are subject to wide interpretation. If they were not, we would not need the likes of CNBC, Bloomberg and other financial information outlets. These sources owe their existence to the opinions of their “experts” that consistently debate opposing viewpoints; their...
I assure you that those successful people such as my Idol Jesse Livermore are not the common folk that want to predict price by patterns or indicators. To ANY SUCCESSFUL trader the decision making goes deeper than that Usually involves Fundamental drivers, Market knowledge, Risk management and interpretation of their views on the market by looking at the statistics (The chart)

most of what people do here in FF of thinking that if you stare at a chart of find a good set up you will predict is more B/S than what does analyst spew.
AVT INVENIAM VIAM AVT FACIAM
  • #9
  • Edited Nov 15, 2012 7:30am Nov 14, 2012 9:55am | Edited Nov 15, 2012 7:30am
the redlion
Quote
most of what people do here in FF of thinking that if you stare at a chart of find a good set up you will predict is more B/S than what does analyst spew.

You are certainly entitled to your opinion. My point is simply that until fundmental data is published/announced and the market collective decides its effect, it is pointless to speculate. It the visual stimulus (charts) that ultimately closes the decision making loop toward action. If not, you will always be at the mercy of the market . . . might as well flip a coin.

I would agree with the premise that additional knowledge is required to understand the nuances of trading. I too am a fan of Jesse Livermore and subscribe to many of his philosophies (timing, patience) that I would consider universal to successful trading. However, I would surmise that his strategies would have to be adapted to current information, technology and global conditions - so not as straight forward fundamentally as back in the day.

Simply staring at a chart and trying to predict is a losing proposition. Staring at a chart, recognizing historical behaviors/patterns do re-occur, applying rules to execute trades, and using emprical data to test and implement a plan and system is far better, a least for me, than trying to determine how/why the latest ECB EU bailout will effect the markets. I'm just not good enough to know, nor do I care until the news is out and the market can digest it.

Place like FF are a place to learn (or not) and get a sense of what's out there. The real challenge is to filter what works and what does not - and that tends to be an individual journey. I maintain that most traders here, and most pundits for that matter, lack a clear understanding of fundamentals and how they can effectively be applied to develop a consistent strategy; if at all. Furthermore, most lack the knowledge and discipline to implement a technical trading system/plan as well.

All that said, as long as what you're doing is profitable, you're right if it works for you. Technicals work for me and that's why I'll defend them.

All the best.

dcginc
  • #10
  • Nov 14, 2012 10:12am Nov 14, 2012 10:12am
Quoting dcginc
the redlion

You are certainly entitled to your opinion. My point is simply that until fundmental data is published/announced and the market collective decides its effect, it is pointless to speculate. It the visual stimulus (charts) that ultimately closes the decision making loop toward action. If not, you will alway be at the mercy of the market . . . might as well flip a coin.

I would agree with the premise that additional knowledge is required to understand the nuances of trading. I too am a fan of Jesse Livermore and subscribe...
pleasure hearing your thoughts as eloquently as you put them.....duly noted
AVT INVENIAM VIAM AVT FACIAM
  • #11
  • Nov 14, 2012 12:30pm Nov 14, 2012 12:30pm
Quoting dcginc
the redlion

As someone with over 30 years in finance, business and the markets, I respectfully disgree with your characterization of technicals and the people that used them to trade.

Fundamentals hinge entirely on speculation. Although they clearly effect the markets, they are subject to wide interpretation. If they were not, we would not need the likes of CNBC, Bloomberg and other financial information outlets. These sources owe their existence to the opinions of their “experts” that consistently debate opposing viewpoints; their...

Spot on Mate...

In a world we are living right now ...everyone from corporations , politicians , governments ..are all liars...( we cant put our blind trust on what they says )


To redlion ... i would only say that Even if you have mastered economics and your analysis is sound....You cant be sure of market direction.
  • #12
  • Nov 14, 2012 12:53pm Nov 14, 2012 12:53pm
@OP just start reading, any introductory macroeconomic book could get you started. Read the financial news and research anything that you don't understand.

What people seem to struggle understand is the notion of what a price represents and the way in which it is arrived at.
Time hides Nothing
  • #13
  • Nov 14, 2012 1:29pm Nov 14, 2012 1:29pm
Quoting richhand
I've been trading with the technicals for a year now and all is pretty good but I now want to get to grips with the fundamentals - and not just news announcements but the whole picture. Other than going back to uni to study economics what would be the best way to go at this?
I'm in pretty much the same situation.
What I was doing was reading this book: http://www.amazon.com/Currency-Tradi...xgy_cc_b_img_a
...but I cant really see how to apply this info to short term trading, where you hold a position for max. 2-5 days.
I also started to follow the ForexLive RSS but noticed the frequent notifications just dissrupt my trading or thought process. I guess I need to develope a certain mental filter to get the info I need but not get disrupted by the noise or less relevant info. This takes time, however.
I've red also some fundie analysis on action forex, FX empire... But its also feels a bit like info overload for now.

So, for the near future will just follow the economic calendar and try to understand the impact of those news and the daily fundamentals on http://www.babypips.com/blogs/pipnoculars/
Thoughts are things
  • #14
  • Nov 14, 2012 2:38pm Nov 14, 2012 2:38pm
Quoting the redlion
that is exactly why people cling to technicals......IGNORANCE, LAZYNESS....thinking a pattern or some sort of magical formula, some sort of chart formation is going to be their edge.
i am not lazy nor ignorant. i know for a fact that technical analysis can work in a scientific way. there are indeed magic formulas that work in the markets(all of them) but someone has to discover something. no one in their right mind would publish a good trading system on a forum just for the purpose of proving something.

from my perspective i am not trading markets . i am trading random processes. if you find a universal trading system that's the best thing in technical analysis. hard to find but very rewarding.

about fundamentals. i respect the guys who make decisions solely on fundamentals and succede. this guys are very very rare. i admit that ta seemed much more simpler than fundamentals at first but when i discovered that ta could be systematic and scientific in nature than the choice was clear. if i will be successful with what i have created in technical analysis i will try to go to fundamentals then and find a systematic way of investing.
  • #15
  • Nov 14, 2012 7:54pm Nov 14, 2012 7:54pm
Thanks to all who replied, that does give me some good starting points. I also look forward to reading about Jesse Livermore!
  • #16
  • Nov 14, 2012 8:28pm Nov 14, 2012 8:28pm
Quoting richhand
I also look forward to reading about Jesse Livermore!
Quick reply.... fundamentals are extremely complicated and Jesse Livermore committed suicide.

I'm not sure what that means.... be careful who you imitate maybe ?????

http://en.wikipedia.org/wiki/Jesse_Lauriston_Livermore
When the Joker is in the deck.. fear not and play it well
  • #17
  • Nov 15, 2012 3:10am Nov 15, 2012 3:10am
Quoting the redlion
learn Macro economics
quantitative finance
mathematics
statistics
finance
I totally agree. All these things are really helpful cause fundamental analysis is more about economics theory than anything else in forex.
  • #18
  • Mar 16, 2013 2:57pm Mar 16, 2013 2:57pm
I have to support the technical side of trading. Every time I "understand" the fundamentals and the financial indicators, I bias my trading decisions against what I see on the charts. Guess what - for me, and I'll stress that point, for me, it rarely works.

If I can understand how a particular chart reacts to dynamic support & resistance levels with the moving averages, together with previous significant s/r levels and the current support and demand zones, as well as current candle patterns, then I have much more success.

Yes the fundamentals drive the market, but only after the numbers are released and market settles on which direction it wants to go.

How many times do see a news event release figures that are supposedly good and are what the analysts wanted to see, only for the chart to go in the opposite direction. Often, the analysts and market drivers have already discounted the news event into the current price - sell on news / buy on rumour, depending on where PA is being driven.!

So, for me, I will continue to back test charts and build the statistical information that I need so that I can trade on what I can see and base my decisions off of the risk analysis and possibly risk/rewards and manage the trades accordingly.

Happy pip hunting.
"To live with Passion, it takes Courage and Grace to survive"
  • #19
  • Mar 17, 2013 8:02am Mar 17, 2013 8:02am
I agree with Redlion in almost everything he says (though I wonder why quant stuff is needed if somebody´s trying to go down the global macro/position trading route). And to the threadstarter, why not read The Secrets of Economic Indicators by Bernard Baumohl (you can find it on Amazon) for a start? Have you ever looked at the FF calendar and felt dazzled? No longer. This book tells you why an indicator is important to know, how it is computed and what it can tell you about the future. It´s also brilliantly written and very accessible. Here´s a quote from the chapter on "Housing Starts and Building Permits". Can´t post more, don´t want to get sued.

HOUSING STARTS AND BUILDING PERMITS
Market Sensitivity:Medium.
What Is It: Records the number of new homes being built and permits for future
construction.
News Release on Internet: www.census.gov/const/www/newresconstindex.html
Home Web Address: www.census.gov
Release Time: 8:30 A.M. (ET); normally released two or three weeks following
the month being covered.
Frequency: Monthly.
Source: Census Bureau, Department of Commerce.
Revisions: Modest revisions occur for the preceding two months on housing
starts and for just one month on permits. Seasonal adjustment changes are
made every April, and they cover two years worth of data.

WHY IS IT IMPORTANT
Looking for a single infallible indicator that can foresee the future direction of the economy?
Forget it; you won’t find any. However, there is one that comes surprisingly close,
and that is housing! Excluding one instance, there has never been a recession in the U.S.
at a time when the housing sector stood strong. Only once since World War II did the
economy contract despite a robust housing market, and that was in 2001. Even then, the
recession was brief and not very deep. This impressive track record is why many experts
view homebuilding as one of the most reliable leading indicators of economic activity.
Residential real estate is among the first sectors to shut down when the economy nears
recession, and it is the earliest to bloom when the economy starts to turn up.
What keeps housing so far ahead of the rest of the economy? Mainly its sensitivity to
interest rates. An overheated economy drives interest rates higher. As mortgage rates
climb, this depresses demand for homes and discourages future construction. Builders are
also less likely to seek construction loans when rates are high. Conversely, when mortgage
rates tumble and home prices decline—events that typically happen during periods
of economic weakness—interest in home buying is rekindled now that it is more affordable.
Builders, in turn, rush back to banks before the cost of borrowing rises again.
Another critical aspect of the homebuilding industry is how powerful an influence it
has on the rest of the economy through what are known as “multiplier effects.” By multiplier
effects, we mean that changes in the pace of housing construction can have major
ramifications for many other industries. Just look at who benefits when housing is
strong. A jump in residential construction drives up demand for steel, wood, electricity,
glass, plastic, wiring, piping, and concrete. The need for skilled construction workers...
  • #20
  • Mar 17, 2013 8:30am Mar 17, 2013 8:30am
Quoting dcginc

As someone with over 30 years in finance, business and the markets, I respectfully disgree with your characterization of technicals and the people that used them to trade.
I think you come off a little misleading here. Reading this most people here would automatically assume that you had a financial background (at least I assumed that), which, according to your homepage, you don´t (meaning you haven´t worked for a bank/institution/fund etc.). And your "30 years in the markets" really should be put into perspective, too. On your HP it says "I have been in the markets sporadically for over 25 years – previously just dabbling here and there." and you have been trading Forex professionally, so the claim goes, for a little under 4 years. But you´re selling trading education. I have a question: Do you offer your clients any proof that you´re a profitable trader? Would you be willing to show them verified bank statements if they asked you for it?
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