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Fundamental Analysis and Forex Trading Strategy

BY: Irene Bell | Category: Finance | Submitted: 2010-05-02 08:50:25
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Article Summary: "Fundamental analysis in Forex is quite comprehensive tool that involves different factors and components. Trading platforms that provide the trader with every tool needed for successful work..."


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One of the ways to plan a trading strategy on Metatrader or any other platform is through fundamental analysis. This approach involves exploring the market as well seemingly unrelated news and events, such as:

a. Political events almost always influence the market as well as national security related incidents that have a power to bring down or boost up a currency. For example, the oil rig explosion in the Gulf of Mexico gave a boost to the oil prices.

b. Indices - GDP, CPI, PPI, BOP, PMI. All of them influence the quote of the national currency. If the US GDP, for example, is lower than expected the dollar will start losing to other currencies.

c. Financial data - stock prices, interest rates, bonds and such. In times of an economic crisis, central banks might leave the interest rate unchanged if the economic recovery or growth is insufficient or if the country did recovered from the crisis, the purpose is to avoid big interest-rate gaps between other countries.

For example, the interest rate serves as a base for the exchange rate of the national currency. If the interest rate is raised, the exchange rate of the currency also rises due to increased demand. That's why trader that uses fundamental analysis to generate signals or confirm trends should follow central bank announcements of the interest rate.

Fundamental analysis also includes the aspect of traders' and analysts' expectations of an index performance. For example, just before the Weekly Inventory Report released in the US, the oil trading prices usually go up and after the release they act according to the results.

Positive business and political news can result in increased investments in the national currency (because traders are huge fans of stability).

One of the best trading platforms that provide the trader with every tool needed for successful work is Metatrader. It's a comprehensive platform (forex, oil, CFD, commodities, silver, gold, metals) that has instruments for both technical and fundamental analysis.
Happy trading!

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