Understanding the fundamental factors of the Forex market
The new traders are always biased in favour of the technical data. They try to trade the market with technical factors and eventually blow up the trading account. There are three major forms of market analysis in the Forex market. Learning the details of technical analysis is fairly easy but when it comes to fundamental factors, the traders become upset. But if you follow the basic guidelines, you will never have a tough time to understand the high impact news. You need to blend the technical and fundamental data to secure the best trades in favour of the market trend.
Though there are many fundamental factors you need to consider, at the initial stage focus on the major news. Let’s learn more about the impact of major news in the Forex market.
Interest rate changes
A change in the interest rate of a certain country economy greatly affects the price movement of certain assets. For instance, if the FED hike the interest rate, you can expect a strong move in the U.S dollar against most of it its major rivals. In fact, such high impact news can even change the long term market trend. Being a rookie trader, you might not understand how things really work when it comes to fundamental factors. You need to take things in a very simple way. Learn to trade the market based on fundamental data is not rocket science. Just look at the long term goals and you will be able to understand the impact of major news releases.
Unemployment change data plays a vital role when it comes to news trading. Being a new Singaporean trader, you can use the demo trading account and see how the data affects the price of a certain asset. Positive unemployment data usually boost the economy and allows the traders to execute long orders. Adding more jobs to the economy means the economy is slowly regaining its strength. On the contrary, if the unemployment rate increases, this clearly suggests the sluggish performance of the economy.
At times you might see a big false spike in the market. This is nothing but the result of a major press conference. Let’s consider the FOMC meeting minutes. During the first session, if the FED comes up with a hawkish statement, you will see a strong rally in the U.S dollar index. But right before the closing of the meeting, the FED comes up with a dovish tone. Such a dramatic change in statement causes major fluctuations in the currency pair’s movement. And this is one of the key reasons for spotting false spike. Being a new trader it’s better to avoid trading the major news since it greatly increases the risk factors in trading.
Learning to trade the news
Trading the news is fairly easy. You need to blend technical and fundamental data to find the very best trade setups. The new traders often think trading is all about technical analysis. But in reality, fundamental factors are the most powerful price driving catalyst in the Forex market. Unless you learn the proper way to assess the fundamental data, you are most likely to lose money in trading. So, stop trading the market based on technical data as it never helps in the long run.
Developing a perfect news trading strategy is a very challenging task. However, if you use the demo account it won’t take much time to understand how this market works. Being a rookie trader, it’s normal to lose money at the initial stage. But you need to learn from your trading mistakes. Try to create a long term goal and trade the market with managed risk. Never follow an aggressive trading strategy since it results in heavy losses. Try to learn a price action trading strategy since it will help you find high-quality trades at extreme market conditions.