Fundamental Analysis Fallacy

Ok, I admit. I'm becoming a convert into fundamental analysis.

Now, this is a HUGE topic. Unlike the manageable size of technical analysis that is limited to the four corner of the monitor, fundamental analysis is limited to the four corners of the globe.

How do I start? What's the theory and formula? How to explain contradictory price movement against facts? How can we be sure that the numbers are not rigged? What's the point of following politics, CNN, CNBC, only to find out price has moved by the time the sexy news anchor said this, this, and this. How do you make fundamentals as leading indicator instead of lagging indicator?

Basically I'm still looking for answers to the questions I posted on my first post on this thread.

I'm an economist. I eat economic news release and statistics alive for breakfast. I understand macroeconomics in the logical sense, but academic training doesn't prepare you for the real life, and my economic skills is honestly useless for forex. In economic theory, you assume there is no manipulation. But manipulation is rampant in forex. It's like trying to study the law to the letter to practice it in a corrupt country.

Please point me in the right direction to proper forex-relevant fundamental analysis.

Muchas gracias. Arigato. Spaciboa. Terima Kasih. Xie Xie. Merci Boucoup. Obrigado.

In my opinion, the first thing you need to do is stop thinking in terms of fundamental vs. technical. Anything that moves the market is relevant. Interest rates, unemployment, GDP, Inflation, Trade Balance are the main items of fundamentals, the release schedule is the same every month and you have it here on FFactory. Get a news source, don't try to cover all of them or worry about which is the best, just pick one you like, they are pretty much the same. Get a squawk box, Ransquawk for example, and compare what they say to your other two sources. The objective is to trade expectations, not actuals. Buy the rumour, sell the fact. Once you get into a routine you will be able to compare other data and news sources to improve on what you have.

Stop making FA some mountain to climb. Just follow the news. Takes abt half an hour a day to get completely caught up. I've already posted what sites I personally use. There's a "News" tab right on the top of every FF page even.. Now use that knowledge to help exploit other traders. It's not the market you're trying to beat, its their participants.

Thanks y'all.

Ok, my first question:

This is a real trade, so I'm putting my money where my mouth is, not a random question.

My Tp of ~30 pips was hit, but price kept waterfalling down to around ~160 pips. How on Earth would you know that massive movement is warranted. What fundamentals would support that?

After so many posts and years of the technical falacy thread it was about time for a thread like this .

I guess another aspect that I'm unsure about is the exact entry and exit point for the trade.

At what point do you determine the relative value of a currency pair since FA is all about finding value?

For example why do you think that EU is oversold at say 1.3000? How do you come up with your calculated should-be value? Say you think EU is only worth 1.2850 considering all aspects of economy, politics, intermarket etc. So then by your analysis, would you directly sell at 1.3000? How and when and where do you enter?

See this is why I'm confused. If you are a TA trader, you'll be damned if you're unaware of FA, in particular news release, and trade about 5 seconds away from NFP. If you are a FA trader, you'll also be damned if you're unaware of anything to do with historical price. You think it is undervalued, but technically, price just hits a major S&R and your SL is soon hit.

No, it's not a mountain to climb, but I'm finding it hard to judge the "value" of a currency. Something that inherently has no value. With businesses, I can easily read the annual statement and you'll get a rough idea of the book value of the company. Real value can never be determined as tangible and intangible assets cannot be precisely valued.

So anyone willing to share his/her line of thought to come up with a conclusion whether a currency is overvalued and undervalued, I'm sure everyone will appreciate it.

You're looking for an exact number? Its impossible.
There are forecasts that state the value like here http://www.fxstreet.com/analysis/for...rrencies-poll/ .. you can use that to see why Eur/Usd has been getting smashed when it rallies. Everyone on that page has a bearish bias toward the pair. Even banks issue estimates and a summary if you can find some of their PDFs. Your job is to find out the reasoning of everyone's bearish bias on Eur/Usd, then making your own forecast from that info.

Exact entry and exit based on fundamentals? Impossible as well. That's where order flow analysis comes in(which is a whole nother thread) Here's a great summary for today's US session http://tinyurl.com/m6bylte Keep in mind that not every move has a resoning behind it but your analysis will help you be on the correct side of the market.

In my view the market moves for two reasons

1) Mechanics
2) Information

You could write a book on each... The two but heads constantly to provide all sorts of interesting situations. And have a seemingly random effect on price movement.

This is my macro fundy trade idea. I am in waiting mood.
The chart is macro_analysis_chart.

Fundamental trade has no fallacy.

Just the time of entry or exit will be depended on what happen in real-time.

Hello Ishtana,

I know ur thread was for June's FOMC meeting but I did not know about this open discussion at that time and I think I am not late to share with you and all the other traders who joined this topic, my view as a fundamental trader. Yes I am a 100% fundamental trader and that means I only look to the charts to find a entry and a exit for my trades and also for a "technical view" of the movements in the market that could sustain my theory. To be more explicit I will give you an example: if my macroeconomic analysis tells me that I should sell the USD I look at usd/crosses looking for some divergences with some indicators (mostly I use the RSI or the accumulation/distribution) as for me the volume is very important. If you ask me why you should read (or maybe u already know it) the Dow Theory. My lowest TF that I use is the daily chart but mostly my analysis I make on the weekly chart. Usually I keep my trades minimum 3 days (that's scalping for me ) and the longest open trade that I ever kept was for 15 months.
Let's get back to your demand now. It's useful to explain what happened at June's FOMC meeting but I can expose my view at what happened at yesterday's meeting. As there is a lot to say and my topic will become too long here I invite you to read it at this link: http://www.forex-galaxy.com/2013/09/...september.html.
I look forward to see your thoughts (and other members also) on my fundamental view on FOMC September's meeting.

Hello Numbnuts,

I am trying to understand what Fundamental Analysis and as i was going over threads in FF, found this Gem. Could you kindly guide me on your points, the highlighted ones as i feel it is very significant, if possible with an example. I will be much obliged.


Thanks