Why Blending Technical and Fundamental Analysis Makes You More Profitable

Among the many skills essential in your Forex trading strategy is the ability
to analyze. There's 2 major types of Forex analysis which are fundamental
analysis and technical analysis. I will show you the different types of
fundamental analysis trading and perhaps you will learn how to use it in your
Forex trading strategy. If you are strictlya technical trader, you might gain
and maybe improve your success by means beyond your existing methods.


Simply speaking, Fundamental analysis depends on the news reports: political
and economic aspects. Traders who use fundamental analysis will monitor various
reports sources: Television, radio, and news feeds on the web; to learn about
the political and financial aspects that may move the currency prices. For
instance, if the US Non- Farm payroll report is good, it will cause the US
dollar to move up. In case the number is disappointing, then the US dollar will
drop against other foreign currencies.


Every major news release includes a forecast or consensus figure determined
by economists prior to the news release. If the actual release number is
different from the forecast or expected figure, the market is surprised and
definately will react to the release immediately. The bigger the surprise, or
deviation, it can create greater reaction. To illustrate, if the upcoming US ISM
Non- Manufacturing PMI has a forecast number of 54. 5, and our standard
deviation is 3. . The actual release is released as 50. 5. Since actual
deviation is 4. , you would enter a short trade on USD/ JPY, USD/ CAD, or USD/
CHF or possibly a long trade on GBP/ USD, AUD/ USD, EUR/ USD.


There are actually three main ways to trade the fundamental analysis: Spike
trading, Retracement trading, and Pre News trading. Trading the spike is among
the most popular strategy to trade the fundamental analysis, and is the best
known. Most Fx traders normally associate spike trading with fundamental
analysis trading. To trade the spike, basically we wait for the news release to
come out. According to the actual release number we'll enter the market
immediately if our expected deviation is reached. This type of trading requires
that you have access to the news release promptly when it is released, have a
fast reaction to entera trade, and have a good broker that allows news
trading.


To trade the retracement, we wait for the news release to come out, we wait
for the initial spike, and then we will wait for the market to retrace back
within just ten to fifteen pips of the pre- release price. Sometimes when we
have a huge deviation, we can get into the market at 20 pips from the pre-
release level, but it will be dependent on your own discretion. Market will
usually retrace within the first 5 to 30 minutes, if a retracement is to take
place. This trading method is especially easier to enter intoa trade, mainly
because we avoid the very first volatility of the initial news release, and a
lot Forex brokers allow this type of news trading.


Pre News trading, this method of fundamental analysis trading is probably the
most advanced and the most difficult to analyze. Basically, we base our entry on
market sentiment and technical trend of the currency pair and we go into the
market five minutes prior to actual news release. You should always enter in the
direction of the current trend and only work with this trading method with news
releases that won’t change the market trend. As an example, you must not use
this method for the US Non- Farm Payroll, GDP, and CPI; but you can pre- news
trade the Retail Sales, Trade balances, and PMI reports.