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Explained: Fundamental Forex trading strategies
Source: | Author:finance-102 | Date2022-12-17 | 168 Views | Share:
Fundamental Forex trading strategies, which are based on fundamental analysis, involve analyzing economic news and events to evaluate the economic health and future potential of an asset. These strategies are often overlooked by traders who primarily focus on technical analysis and intraday trading, resulting in a lack of understanding about the global economic environment and a limited range of tools for a more comprehensive approach to trading.

Fundamental Forex trading strategies, which are based on fundamental analysis, involve analyzing economic news and events to evaluate the economic health and future potential of an asset. These strategies are often overlooked by traders who primarily focus on technical analysis and intraday trading, resulting in a lack of understanding about the global economic environment and a limited range of tools for a more comprehensive approach to trading.

It is important for traders to consider incorporating fundamental strategies into their overall approach to diversify their trading techniques and improve their understanding of the market. Fundamental analysis is a method of analyzing various factors that can impact the price of an asset, including economic indicators such as central bank interest rates, GDP, production capacity, employment, and consumer confidence.

The following fundamental factors are main infectors using for fundamental analysis:

Central bank announcements and actions: Central banks regularly review economic data and make decisions about whether to raise, cut, or maintain interest rates. Central bank interest rates are a key economic indicator that reflects the health of an economy and can impact the value of financial assets.

Retail sales & Consumer Price Index (CPI): Retail sales can be a good indicator of the overall health of an economy. When people are feeling financially secure, they tend to spend more, leading to increased demand for goods and services. The Consumer Price Index (CPI) is a measure of the average price level of a basket of goods and services consumed by households. It is used to track changes in the cost of living over time and is an important economic indicator.

Unemployment: The unemployment rate is a measure of the percentage of the labor force that is not employed but is actively seeking employment. It is one of the key economic indicators that a low unemployment rate can signal a strong economy and may lead to an increase in demand for the country's currency, causing its value to rise relative to other currencies.

Gross Domestic Product (GDP): Gross Domestic Product (GDP) is a measure of the economic output of a country. It is considered to be a key indicator of the overall health and growth of an economy. GDP is often used to compare the economic performance of different countries and to assess the standard of living of a country's citizens.

Fundamental analysis can be used to make trade decisions based on a thorough understanding of the economic and political context in which the asset operates. To effectively use fundamental Forex analysis, traders need to be aware of key market drivers and have a basic understanding of economic concepts like capital markets and microeconomics. It is also important to stay informed of current events that can impact the financial market, which can be done by gathering up-to-date information from various media sources like television, the internet, and radio.

Fundamental Forex trading strategies are best suited for long-term investors as they focus on global trends rather than short-term market movements. These strategies may not be suitable for short-term trading techniques like scalping. The constantly changing economic landscape and various events that can have varying impacts can be forecasted using publicly available information, making fundamental Forex trading strategies potentially safer compared to the stock market.


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