Monday, September 15, 2008, 04:18 PM
[
forex trading ]
Fundamental Analysis
Fundamental
analysis is a method of forecasting the future price movements of a
financial instrument where fundamental traders basically trade the news.
News
Trading has the potential to be a profitable way to trade the Forex
market. It must be noted, however, that a high level of risk is
involved. Fundamental Traders analyze key economic data, including news
and government reports, to evaluate trading opportunities.
From
the fundamentalists perspective, currency exchange rates are affected
primarily by economic and political conditions, and occasionally by
central banks intervening in the currency markets in an attempt to
influence the value of their currencies.
Some of the key figures
tracked by fundamentalists include interest rates, inflation, trade
balance, GDP (Gross Domestic Product), CPI (Consumer Price Index), PPI
(Producer Price Index), capacity utilization, factory orders, durable
goods orders, inventories, and employment statistics. Fundamentalists
are also constantly evaluating the potential impact of military
conflicts, natural disasters, and changes in political leadership.
There
is a whole art and science to Fundamental trading, or more commonly
know as news trading. There are regular news events that get released
on a regular basis like weekly, monthly, every 6 weeks (FOMC - Fed
Interest rates). These are market moving events. Good news for one
currency could be bad news for another. Many times the market already
has an expectation, whether it is right or wrong, and for the most part
has already been priced into the market.
When an unexpected number
comes out, that's when the currencies can go wild, and if you're on the
right side of the trade you will make money.
News trading is not
black and white. A good number for the USD does not mean the USD will
increase in value. It could do the opposite. So keep this in mind if
you decide to be a fundamental trader vs. a technical trader.
Fundamental
traders have to keep up with the news on a continuous basis and they
need to understand what those numbers mean. I can't teach you
everything there is to know about fundamental trading, but there are
services out there that can help you learn.
MACD with Parabolic SAR
Parabolic SAR is more popular for setting stops than for establishing direction or trend.
Parabolic SAR is base on the following rule: to shift the levels of closing prices only in direction of opened position.
If there is a long position opened before, it is possible to increase the level of closing prices, but not to decrease it.
If the short position is opened, it is possible to decrease the level of closing prices.
The indicator can be very effective if a filter of some sort is used like MACD.
If
we were long the market, then only long signals would be taken and the
short signals ignored as long as the filter has given a buy signal and
remains in buy.
Now you can confirm the signal by using the both indicators.
Signal to buy:
When MACD bars is over 0 level and rising, signal line below bars end and rising and SAR dots below price chart.
Signal to Sell:
When MACD bars is below 0 level and falling, signal line over bars end and falling and SAR dots over price.