| Fundamentals |
?How to trade based on Fundamentals
Here I am about to describe how I use fundamentals we get from forex calendar in my trading and how we can take advantage of news releases every week.
Probably all know about forex calendar and news so I am not gonna explain that in details, my aim here is to let people know how to trade fundamentals, what to look for and when exactly trade them.
So far I am not the most successful news trader definitely, I have some mistakes on regular basis but I am learning this and sometimes I can actually get some lovely pips from news releases.
First rule in news trading I have noticed and come up with: Do not speculate on pre-news because believe me there are many investors who do that and in case you are wrong on speculation, it is hard to get out of that trade in case there is surprise in that release to opposite direction.
Second what we should notice: Always look for release, do not trade it if you do not get any surprise at all, for example if Manufacturing PMI for pound was expected at 49.2 and it came at 49.2 look for market reaction, but likely there will be no at all mostly, so you might not want to be in that trade too.
If you trade one release like I mentioned the same manufacturing PMI, you should definitely pay attention to previous releases over at least 1-2 weeks period for pound because if there is down trend, bad releases, then market is likely to punish pound if there is even slight miss in that release.
I know many traders might ask what to do if there are like 10 releases for euro, what to know what we should trade, and what not.
First definitely look at which are more important, clearly French unemployment data will be less important than whole Eurozone data, so do not expect much of an action after first releases, wait for final numbers, wait for most important releases to come out. I have came up with losing trades only because I jumped in trade after market moved about 20 pips after release, but later we got more important release at much better numbers and obviously market gave up that dip and went even further up, I ended up with losing trade.
One great way how to trade news release is open 5 min chart on that pair you are looking to trade, wait for release and then look at chart, wait for 5 min candle to close, it will show you strength after that release and that could be very nice pointer of direction where that pair might head later. However this is important to understand that not always market keeps that strength or weakness, sometimes market is uncertain and then it is wise to use very tight stop loss to avoid any surprises.
About the take profit and stop loss targets. Stop loss for news trading should be tight, do not use like 50-60 pip stop loss, which is waste of money, no more than 30 pips I say. If you do not get any surprise in release, do not trade it because then market might be choppy and you might even lose that trade. However take profit target is where your technical analysis must step in, look at chart, look for any price points where market might find them hard to break, that is your first target. I am saying from my experience that about 100 pips that is maximum you might get from release in one day and that is only when volatility is extremely high, otherwise maybe 50 up to 80 pips on average basis could be good.
One big aspect we have in forex is all the meeting minutes, rate decisions, press conferences. This is which is most difficult part in forex, sometimes market can be very aggressive and volatile and extremely unpredictable too. I can’t explain exactly how to trade each press conference or mpc minutes right now, there I hope I can spend some time writing how to do best on some of these speeches if some members will want to know more
Right now that is all information I can share from theory, but if there are traders who really want to know more, I would be willing to explain more in details here because we have to take news releases and look at them separately, then that idea might be clearer to others
Looking forward to questions and some qualitative advices, opinions only!
