* Quick Spoiler: Thread’s about Fundamental Analysis (FA) more than Technical Analysis (TA), technical fans might have to stomach a little while reading.
Self-introduction
Traded for almost 6 years, I was from the technical analysis camp in the first 3 years of my trading. Certainly, I was those who believed in "combining both Technical + Fundamental" to obtain the best trading results.
However, after being in the market and trading community for awhile, I’ve come to a conclusion that everyone thinks everyone can be anyone, in the beginning, before even trying long enough.
That said, what I’m trying to say is I’ve yet to see someone who truly blends both Fundamentals & Technical analysis beautifully, maybe the professionals, I don’t know.
The knowledge ride and agony of alternating trading with conflicting signs from technical or fundamental analysis, or both, was certainly a roller coaster ride for me in my first few years of FX trading.
By the way, I'm a "commercial member", termed by the administrator and yes, I sell signals, but NO, this thread is not for promotion of it. This thread is about discussing the importance of incorporating Fundamentals Analysis into FX trading and perhaps, similar arguments about NOT using Fundamental analysis.
Going back to the discussion, Fundamental Analysis or Technical Analysis?
Yes, both, in the most ideal world, but how do you define and determine the percentage that should be utilized on either side, and why?
My FX Trading Strategy - based on Fundamentals values.
For me, I’ve valued my strategy to be using 75% Fundamental and 25% Quantitative (Technical), while it's just a general estimation, I’ll elaborate more on how I utilize Fundamental (data) and the rest of what I do for the growth of the Forex investment funds.
FUNDAMENTALS COMPONENT:
- Tracking 312 indicators (fundamental data) across 9 currencies.
- Tracking yearly (y/y) and quarterly (q/y) results of the individual data, on top of the m/m data that is usually being watched.
- Tracking moving average movements of the individual indicator (fundamental data).
- Consolidated strength index with tracked data above.
On top of those, tracking Price movements (daily) with respect to change of the generated fundamental values, from which, a correlation factor between fundamental value change and price action change is also formulated to derive to a movement of estimated “intrinsic” value. This is the core basis of the strategy to generate orders signal (trade placement).
Not too sure if it all constitutes to being a “Technical analysis”, since I’m actually also using mathematical models and algorithm to track change of indicators, but I’m still pretty much contended that it is fundamentals data I’m using to trade the market and it more quantitative, than technical.
TECHNICAL COMPONENT:
Fibonacci levels and whole numbers.
ACCOUNT MANAGEMENT:
For downside risk, risk of error (wrong analysis), or the risk of the Fundamental analysis being totally irrelevant or not applicable (yet) for the market, a -40pips (preferably to 1% - 2% account size) is in place.
Once hit, the strategy moves on to the next level of entry, with re-evaluation of orders generated still biased and dependent on the quantified fundamental standpoint on the daily generation of orders.
The strategy does not simply take the “If fundamental low, sell” or “If fundamental high, buy” logic.
Instead, it attempts to capture market inefficiencies & distortion, rather than to capitalize on identified quantified fundamental strength of currency.
The idea & rationale behind is to capitalize on based on the below philosophy:
{C}1) Market participants knows it is overextended, but decides to carry on with the current market sentiments, this will allow pullback to be extra sensitive and susceptible for pullbacks,
{C}2) Fundamentalists & Technician should probably be also waiting to entry in the identified areas (Fibo levels), unless otherwise, next level will be ordered.
{C}3) Over-extension of market also means risk is discounted, wrong trades are further protected by having a pre-determined; fixed-40pips stop loss (SL) and re-evaluation on a daily basis.
That said, orders are generated on a daily basis, but it does not change daily unless with significant fundamental value change.
The strategy is now tracking 16+ currency pairs, with orders generated on all currency trades with the above criteria hit. That said, orders can take as fast as 1 day if triggered, to 5 trading days.
EXAMPLE:
What the brown line is suggesting AUDNZD should worth 1.0990 value now.
So significant distotion is still in the pair, with current price around 1.0800. Which also means bullish biased.
* I’ve already identified and captured the “low of 1.07s area to capture till 1.0850s, I’m clean on AUDNZD and waiting for pullback for entry. You can see my trade history for more information (note: my orders are private, so you can’t see it unless I subscribe to you as well).
More information about the Strategy is available at http://tiny.cc/HAresearch
Self-introduction
Traded for almost 6 years, I was from the technical analysis camp in the first 3 years of my trading. Certainly, I was those who believed in "combining both Technical + Fundamental" to obtain the best trading results.
However, after being in the market and trading community for awhile, I’ve come to a conclusion that everyone thinks everyone can be anyone, in the beginning, before even trying long enough.
That said, what I’m trying to say is I’ve yet to see someone who truly blends both Fundamentals & Technical analysis beautifully, maybe the professionals, I don’t know.
The knowledge ride and agony of alternating trading with conflicting signs from technical or fundamental analysis, or both, was certainly a roller coaster ride for me in my first few years of FX trading.
By the way, I'm a "commercial member", termed by the administrator and yes, I sell signals, but NO, this thread is not for promotion of it. This thread is about discussing the importance of incorporating Fundamentals Analysis into FX trading and perhaps, similar arguments about NOT using Fundamental analysis.
Going back to the discussion, Fundamental Analysis or Technical Analysis?
Yes, both, in the most ideal world, but how do you define and determine the percentage that should be utilized on either side, and why?
My FX Trading Strategy - based on Fundamentals values.
For me, I’ve valued my strategy to be using 75% Fundamental and 25% Quantitative (Technical), while it's just a general estimation, I’ll elaborate more on how I utilize Fundamental (data) and the rest of what I do for the growth of the Forex investment funds.
FUNDAMENTALS COMPONENT:
- Tracking 312 indicators (fundamental data) across 9 currencies.
- Tracking yearly (y/y) and quarterly (q/y) results of the individual data, on top of the m/m data that is usually being watched.
- Tracking moving average movements of the individual indicator (fundamental data).
- Consolidated strength index with tracked data above.
On top of those, tracking Price movements (daily) with respect to change of the generated fundamental values, from which, a correlation factor between fundamental value change and price action change is also formulated to derive to a movement of estimated “intrinsic” value. This is the core basis of the strategy to generate orders signal (trade placement).
Not too sure if it all constitutes to being a “Technical analysis”, since I’m actually also using mathematical models and algorithm to track change of indicators, but I’m still pretty much contended that it is fundamentals data I’m using to trade the market and it more quantitative, than technical.
TECHNICAL COMPONENT:
Fibonacci levels and whole numbers.
ACCOUNT MANAGEMENT:
For downside risk, risk of error (wrong analysis), or the risk of the Fundamental analysis being totally irrelevant or not applicable (yet) for the market, a -40pips (preferably to 1% - 2% account size) is in place.
Once hit, the strategy moves on to the next level of entry, with re-evaluation of orders generated still biased and dependent on the quantified fundamental standpoint on the daily generation of orders.
The strategy does not simply take the “If fundamental low, sell” or “If fundamental high, buy” logic.
Instead, it attempts to capture market inefficiencies & distortion, rather than to capitalize on identified quantified fundamental strength of currency.
The idea & rationale behind is to capitalize on based on the below philosophy:
{C}1) Market participants knows it is overextended, but decides to carry on with the current market sentiments, this will allow pullback to be extra sensitive and susceptible for pullbacks,
{C}2) Fundamentalists & Technician should probably be also waiting to entry in the identified areas (Fibo levels), unless otherwise, next level will be ordered.
{C}3) Over-extension of market also means risk is discounted, wrong trades are further protected by having a pre-determined; fixed-40pips stop loss (SL) and re-evaluation on a daily basis.
That said, orders are generated on a daily basis, but it does not change daily unless with significant fundamental value change.
The strategy is now tracking 16+ currency pairs, with orders generated on all currency trades with the above criteria hit. That said, orders can take as fast as 1 day if triggered, to 5 trading days.
EXAMPLE:
What the brown line is suggesting AUDNZD should worth 1.0990 value now.
So significant distotion is still in the pair, with current price around 1.0800. Which also means bullish biased.
* I’ve already identified and captured the “low of 1.07s area to capture till 1.0850s, I’m clean on AUDNZD and waiting for pullback for entry. You can see my trade history for more information (note: my orders are private, so you can’t see it unless I subscribe to you as well).
More information about the Strategy is available at http://tiny.cc/HAresearch
Attached Image (click to enlarge)
