Significance Of Fundamental Analysis When Trading.

Fundamental analysis allows a trader to evaluate the macroeconomic conditions in which the domestic currency is, to see perspectives of economic development. This is an important indicator, since if the economy is in decline, it is unlikely that someone would like to buy its currency or invest in firms (buy the stock, for example). Fundamental analysis is essentially long-term, since the economy – “long player”, if some process has begun, then it will finish not soon. Its applying gives the trader vision of the situation as a whole.

And the main moment in the fundamental analysis is the tracking of news that may have economic and political nature, but also it is taken into account different vis majors, natural disasters, etc. To news of an economic nature contains such key indicators as GDP growth, unemployment, inflation, development of industrial production, etc. Altogether there are about 30 main macroeconomic indicators, which will impact the change of course very much. This news may be the information about changing the basic interest rates, a press conference of the head of the Central Bank. The main account interest rate -is the percent, under which the country’s central bank gives loans to commercial banks. The discount rate is the main mechanism that is applied to management of inflation. And the higher it is, the more attractive a given currency to investors is.

The publication of this data occurs in a strictly defined time and date, and information about the schedule for its release can be obtained from special economic calendars. And at that moment, when the news appears on the market, according to published data, a sharp bound of the course may happen in the market.

Influence of news on exchange rate.

Let’s look at an example of Jan. 22, 2008. Assume, you plan your deal and would like to buy Euros. And you know that today it will be released the decision to change the basic discount rate of the European Central Bank (ECB). Until that time there were rumors and speculations at the market that the rate may be lowered because of some slowing of economic development in the Eurozone, and then the appeal of assets for investors in the Euro would be lowered. Therefore, the decline of the euro against the dollar could be seen. When the decision was published, it became clear that rate remained on the same level (4%), the market breathed a sigh of relief, and the course hoicked. The following press conference of ECB President Jean-Claude Trichet gave optimism to the speculators, during which he said that the ECB will timely take steps to maintain the steadiness of Euro.

Here is how a trader may apply fundamental analysis in his trade. But that’s not all. We viewed an example of the so-called short positions, when your deal lasted only a few hours. But the lasting of the transaction may be a few days or even weeks. And here, to predict the direction of the rate, you also use the fundamental analysis.

Nowadays people are searching for additional or even primary sources of income as never. World economy is still in tough condition, and to get a well-paid job is not that easy task. And forex is one of the ways to make some money. To trade successfully one has to be aware of events on the market, so live forex news is of great help here. Those who don’t know where to get fx news can take advantage of the online network. Just type “forex news trading“, for example, in Google or other search engine and you will get many news sources to choose from.

Significance Of Fundamental Analysis When Trading.