Fundamental Analysis Strategy
Fundamental Analysis Strategy
Fundamental Analysis is largely subjective and much of the interpretation of the information is personal. Traders interpret the news and data and then apply the information to their investment strategies, making subjective decisions on the changes in market prices or on the changes that occur once the reports have an influence on the market. This interpretation of the news and information is a skill that requires practice and a certain level of experience.
How To Use The Economic Calendar
Firstly we need an Economic Calendar.
Then we need to select from all of the news events of the week that may give rise to greater volatility and therefore, have a high impact.
Once identified, we take note of the ones that interest us and prepare to intervene when the time comes.
Every economic event selected will have four fundamental figures to be aware of:
Degree of volatility for the relevant currency
Date and time of announcement of the news item
Proceed in this manner:
Choose only the news that can create greater volatility.
Open the platform and be ready to invest with different techniques and varying timeframes of 1, 5, 10 and 30 minutes.
In another browser tab, near the expiration time of the news, continually refresh the Economic Calendar page until the release of the news item.
The news can be POSITIVE, NEGATIVE or NEUTRAL; hence, you must proceed with great care.
A. If the news for the relative currency X is positive (where the result appears in green), then choose a currency pair where currency X appears as the numerator and immediately open a bullish position (an UP or CALL option). Example: News on Euro, currency pair EUR/USD
B. Obviously if you choose a currency pair where the value X appears as the denominator, then you have to open a down position.
C. (DOWN option, PUT).
D If the news for the relative currency X is negative (where the result appears in red), then choose a currency pair where currency X appears as the numerator and immediately open a bearish position (a DOWN or PUT option).
E. (DOWN option, PUT). Example: News on the GBP, currency pair GBP/USD.
F. Obviously, in this case, if you choose a currency pair where the value X appears as the denominator, then you have to open an up position.
G. (UP option, CALL)
H. If it is neutral, where the result is identical to the prediction, then leave it be. There can also be more than one news item released simultaneously for the one currency. If they are all positive, then you may proceed as in point A; if they are all negative, proceed as in point B;
where there are conflicting results with mixed positives and negatives, just stop and leave it be.
Example: News on the Canadian Dollar, CAD
It is worth reiterating that we are always dealing with a strategy here and so, just as it can help to bring you profitable results, it can also lead to the loss of your investment.
Therefore, always act with great caution and be aware of getting carried away.
Use the technique with short timeframes – 5min 10min up to a maximum of 30 minutes.
This strategy derives from the fact that the market tends to have an exaggerated reaction to unexpected news and will then return to the original direction it had prior to the news, should the information not be considered essential to the long-term value of the financial instrument!