Forex Essentials Course: 21 lessons to get started in Forex

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10. Fundamental Analysis in the Forex
Thu, Oct 16 2008, 16:42 GMT
by PFX Team
LearningMarkets.com
Analyze fundamentals and technicals
We have found that traders tend to focus on one type of analysis or the other (fundamental or technical) in their trading and will often completely dismiss other types. We encourage traders to spend the time it takes to understand the underlying forces moving the market (fundamentals) as well as what is happening in price, volume and volatility (technicals.)
To that end, let’s define Fundamental Analysis. We separate fundamental forces into two categories:

A closer look at market traded fundamentals
The advantage of Market-traded/Intermarket Fundamentals is that they are exchange traded. For example, interest rate information is not being fed to you through a single official source that will lag the real market. Market traded information is usually real-time, and pulls from very distributed sources to reflect consensus information much more effectively than a survey ever could. Most technical analysts will argue that all the news is wrapped up in prices anyway so getting to the exchange traded information is much more efficient.
There are two things you need to know about market traded fundamentals:
- 1. Higher yields available in one economy should fundamentally strengthen its currency.
- 2. Yields are available returns from bonds, equities, deposits and other investments
Of course, since forex pairs move relative to each other, these fundamentals, or yields only have value when compared to the same measures across currency borders.
Imagine, for example that yields in Australia (AUD) are much higher and have been trending higher than those available in the United States (USD) for a few years. That creates a yield, or fundamental differential, that should push the AUD up against the USD.
Another way to look at this is as a see-saw. If the AUD is outweighing the USD from a fundamental perspective, then the AUD/USD see-saw will be pointing up and to the right. By no coincidence – so will the AUD/USD currency pair.

Forex Essentials Course - 21 lessons:
1. What is the forex 2. Supply and Demand 3. How Trading Works - Interbank and the Forex 4. Choosing a Dealer 5. Forex Pairs - Characteristics and Qualities6. Earning Interest in the Forex 7. Margin and Leverage8. Short Term vs. Long Term Trading 9. Forex Futures vs. Spot Forex Accounts 10. Fundamental Analysis in the Forex 11. The Calendar and Economic News 12. Introduction to Charting and Technical Analysis 13. Support and Resistance 14. Fibonacci Analysis 15. Price Patterns16. Continuation Patterns17. Reversal Patterns 18. Technical Indicators 19. Portfolio management – Diversification20. Portfolio Management - Position Sizing and Stop Losses21. Introduction for Forex Options Published on
Thu, Nov 20 2008, 09:32 GMT
Archive
- Introduction: Getting Started In Forex
Published On Tue, Nov 18 2008, 17:39 GMT
- 1. What is the forex
Published On Mon, Oct 27 2008, 14:53 GMT
- 2. Supply and Demand
Published On Fri, Oct 24 2008, 14:20 GMT
- 3. How Trading Works - Interbank and the Forex
Published On Fri, Oct 24 2008, 09:06 GMT
- 4. Choosing a Dealer
Published On Thu, Oct 23 2008, 09:57 GMT
[ View All ]
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