What is Fundamental Analysis?

What is Fundamental Analysis?

Fundamental analysis is based on the theory that the market price of an asset tends to move towards its intrinsic (or “real”) value. Fundamental analysis is the actual method used to try to predict the intrinsic value of an investment.

In Forex trading, fundamental analysis entails predicting the price valuation of a currency and its market trends. This is done by analyzing current economic conditions, government policy and social factors within a business cycle framework. In order to accurately analyze the market, traders gauge a country’s economic state by examining macroeconomic indicators covering:

• Interest Rate Announcements
• Gross Domestic Product (GDP)
• Consumer Price Index (Inflation) and Spending Indicators
• Employment Indicators
• Retail Trade and Consumer Confidence
• Balance of Trade Surplus or Deficit
• Government Fiscal and Monetary Policy

Main Macroeconomic Indicators

There are many economic indicators and private reports that can be used to assist in evaluating the fundamentals of Forex. In order to successfully utilize these to your advantage, a trader should understand what the indicators are, what their figures mean and what effect these figures have on a country’s economy.

Macroeconomic indicators are published regularly by government agencies and the private sector. These statistics indicate the current status of the economy on a particular area of the economy – such as industry, labor market, trade, etc.

In order to assist our traders with effective market analysis, Trader24 offers all our users use of an Economic Calendar. This calendar details dates of critical fundamental announcements and events. When the calendar is correctly used, it can be a valuable resource for any Forex trader. In fact, most seasoned traders follow these dates and events carefully to assist them in their daily trades.

Once the macroeconomic indicators have been published, we are then able to observe the volatility of the market.

Interest Rate Announcement

Interest rate plays the most important role in moving the prices of currencies in foreign exchange markets. Central banks (the institutions that set interest rates) are therefore the most influential factors. As currencies are the representations of a country’s economy, differences in currencies affect the value of currencies in relation to each other. When banks change interest rates, this has a direct impact on the Forex market’s movement and volatility. As these factors have such a large impact on a Forex trader’s trading patterns, accurate speculation of the central bank’s actions can significantly increase a trader’s chances of a successful trade.

Gross Domestic Product (GDP)

The Gross Domestic Product (GDP) represents the total market value of all goods and services produced in a country during a given year. It is the broadest measure of a country’s economy.

Given the fact that GDP is considered a lagging factor, most traders focus on two (2) reports – issued in the months prior to the final GDP figures – the advance report and the preliminary report. If there are significant revisions between these two reports, considerable volatility can be expected.

Consumer Price Index (CPI)

Probably the most crucial indicator of inflation is the Consumer Price Indicator (CPI). Inflation is tied directly to the purchasing power of a currency and affects the country’s standing on the international market. The CPI represents changes in the level of retail prices for the basic consumer – if an economy has developed in “normal” conditions, an increase in CPI can lead to an increase in basic interest rates; an increase in basic interest rates, in turn, leads to an increase in the attractiveness of a currency.

Employment Indicators

Employment indicators play an important role in measuring the attractiveness of a currency, as this reflects the overall health of an economy or business cycle. A healthy economy is one where good numbers of jobs are being created, a large percentage of the workforce is actively working, smaller numbers of new people are declared unemployed, etc. In order to accurately measure the health of an economy, it’s important to have a clear understanding of the employment indicators. Further to this, the rate and speed at which wages increase are also a good indicator of the health of an economy.

Retail Sales

The retail sales indicator (released monthly) is an important factor for a trader to consider as it shows the overall strength of consumer spending and the success of retail stores. The report can be used to predict the performance of indicators and to assess the immediate direction of an economy.

Balance of Payments

The Balance of Payments represents the ratio between the number of payments received from abroad and the number of payments going abroad. In other words, it shows the total foreign trade operations, trade balance, and balance between export and import, transfer payments. If the coming payment exceeds payments to other countries and international organizations the balance of payments is positive. The surplus is a favorable factor for the growth of the national currency.

Government Fiscal and Monetary policy

A government aims to achieve a stabilization of an economy through manipulating fiscal and monetary policies. A stable economy is considered to be one with full employment, control of inflation and an equitable balance of payments. Fiscal policy relates directly to expenditures and taxes; whereby monetary policy relates to financial markets and the supply of credit, money and other financial assets.

How to Choose a Forex Broker?

TopAsiaFx.com helps you compare and choose your preferred Forex Broker. We suggest keeping the following checklist in mind when making your decision:

• Is the Forex Broker regulated?
• Account Details: Ideally, your broker should offer either a selection of account types or some element of customizability. Competitive spreads and easy deposits/withdrawals are good indicators too.
• Number of Currency Pairs offered: The variety of currency pairs on offer, as well as the quantity, should be considered (the more of both, the better).
• Availability of Customer Service.
• Quality of the Trading Platform: look for a platform that is easy to use, straightforward and offers a collection of technical and analytical tools to enhance your trading experience.

Rank	Broker Name	Special Offer	Minimum Deposit	Spread	User Score	Maximum Leverage	Regulation	Start Trading
1	NordFX	55% Deposit Bonus	$10	0.0 Pips	96	1:1000	VFSC	Open Account
2	SGT Markets	Refer a friend $10	$500	0.0	95	1:400	IFSC	Open Account
3	OctaFX	50% Deposit Bonus	$100	0.4	94	1:500	IBC	Open Account
4	Exness	No	$1	0.1	93	1:2000	FCA,CySEC,IBC	Open Account
5	IC Markets	No	$200	0.0	92	1:500	ASIC	Open Account
6	Tickmill	$30 Welcome  Account	$100	0.0	91	1:500	FSA,FCA	Open Account
7	Axiory	$50 Deposit Bonus	$200	0.0	90	1:400	IFSC	Open Account
8	Justforex	100% Deposit Bonus	$1	0.0	89	1:3000	IFSC	Open Account
9	ThinkMarkets	No	$250	0.4	88	1:400	ASIC,FCA	Open Account
10	XM	$30 Welcome Account	$5	0.0	87	1:888	ASIC,FCA,IFSC	Open Account
11	FBS	$50 Welcome Account	$1	0.0	86	1:3000	IFSC	Open Account
12	HotForex	No	$5	0.0	85	1:1000	INC	Open Account

Using Percent R Indicator to Trade - Get Precise System

In the original work, the Williams method focused on 10 trading days to determine the market trading range. After a 10-day trading range is determined, he calculates where today's closing prices fall within that range.

The study of% R is similar to the Stochastic indicator, except that Stochastic has internal tidy up and that% R is plotted on a reverse scale, with 0 at the top and 100 at under.

% R oscillates between 0 and 100%. A value of 0% indicates that the closing price is the same as the period. Conversely, a value of 100% indicates that the closing price is identical to the low period. Williams Indicator is designed to show the difference between the high period and today's closing price with the trading range of the specified period. Therefore the indicator shows the relative situation of the closing price in the observation period.

The trading rules are simple. You sell when% R reaches 20% or lower (the market is overbought) and buy when it reaches 80% or higher (market oversold). However, like all overbought/oversold indicators, it is wise to wait for indicator prices to change direction before starting any trade.

Larry Williams defines the following trading rules for% R: Buy when this percentage reaches 100%, and five trading days have passed since the last 100% was reached, and after that, it falls below 85/95%. Sell when% R reaches 0%, and five trading days have passed since the last 0% is reached, and after that Williams% R returns up to around 15/5%.

How to Choose a Forex Broker?

TopAsiaFx.com helps you compare and choose your preferred Forex Broker. We suggest keeping the following checklist in mind when making your decision:

• Is the Forex Broker regulated?
• Account Details: Ideally, your broker should offer either a selection of account types or some element of customizability. Competitive spreads and easy deposits/withdrawals are good indicators too.
• Number of Currency Pairs offered: The variety of currency pairs on offer, as well as the quantity, should be considered (the more of both, the better).
• Availability of Customer Service.
• Quality of the Trading Platform: look for a platform that is easy to use, straightforward and offers a collection of technical and analytical tools to enhance your trading experience.

Rank	Broker Name	Special Offer	Minimum Deposit	Spread	User Score	Maximum Leverage	Regulation	Start Trading
1	NordFX	55% Deposit Bonus	$10	0.0 Pips	96	1:1000	VFSC	Open Account
2	SGT Markets	Refer a friend $10	$500	0.0	95	1:400	IFSC	Open Account
3	OctaFX	50% Deposit Bonus	$100	0.4	94	1:500	IBC	Open Account
4	Exness	No	$1	0.1	93	1:2000	FCA,CySEC,IBC	Open Account
5	IC Markets	No	$200	0.0	92	1:500	ASIC	Open Account
6	Tickmill	$30 Welcome  Account	$100	0.0	91	1:500	FSA,FCA	Open Account
7	Axiory	$50 Deposit Bonus	$200	0.0	90	1:400	IFSC	Open Account
8	Justforex	100% Deposit Bonus	$1	0.0	89	1:3000	IFSC	Open Account
9	ThinkMarkets	No	$250	0.4	88	1:400	ASIC,FCA	Open Account
10	XM	$30 Welcome Account	$5	0.0	87	1:888	ASIC,FCA,IFSC	Open Account
11	FBS	$50 Welcome Account	$1	0.0	86	1:3000	IFSC	Open Account
12	HotForex	No	$5	0.0	85	1:1000	INC	Open Account

How To Trade With Stochastics?

A stochastic oscillator is a momentum indicator to compare the closing price of a commodity with a range of prices over a certain period of time. The idea behind this indicator is that prices tend to approach previous highs in bull markets, and near their lows in bearish markets. Transaction signals can be seen when a stochastic oscillator crosses its moving average.

Two stochastic oscillator indicators are usually calculated to assess future price variations, which are fast (% K) and slow (% D). This statistical comparison is a good speed indicator where the price changes or the Impulse of Price.

Two lines of Stochastics:

% K - Is the main line and is usually displayed as a solid line

% D - Is only a moving average of% K and is usually displayed as a dashed line

There are two well-known methods for using the% K and% D indicators to make decisions about when to buy or sell shares. The first involves crossing% K and% D signal, the second involves basing buy and sell decisions on the assumption that% K and% D oscillate.

In the first case,% D acts as a trigger or signal line for% K. Buy signals are given when% K crosses through% D, or sell signals when crossing down through% D. Such crossover can occur too often, and to avoid repetition repeatedly, one can wait for the crossover to occur together with oversold/oversold recalls, or only after the peak or trough at the% D line. If price volatility is high, a simple moving average of the Stoch% D indicator can be taken. This statistic smooths fast price fluctuations.

In the second case, some analysts argue that the% K or% D level above 80 and below 20 can be interpreted as overbought or oversold. It is recommended that purchases and sales be given a deadline for returning from this threshold. In other words, someone must buy or sell after a slight reversal. Practically, this means that once the price exceeds one of these thresholds, the investor must wait for the price to return through that threshold (eg if the oscillator is above 80, investors wait until it drops below 80 to sell). In currencies, we mainly use the Stochastic Oscillator on the 15 and 60-minute charts.

Use Stochastics in Trending Market The key is when the market is trending, we will see for oversold conditions (when Stochastic falls below the oversold level (below 20) and rise again above the same level) to get ready to trade, and in the same way, when the market is located downward trend we will only look for overbought conditions (when the Stochastics rise above the overbought level (above 80) and fall back below the same level.

Use Stochastic in the Trending market

Buy when% K drops below the oversold level (below 20) and rises back above the same

level.

Sell when% K rises above the overbought level (above 80) and drops back below the same

level.

How to Choose a Forex Broker?

TopAsiaFx.com helps you compare and choose your preferred Forex Broker. We suggest keeping the following checklist in mind when making your decision:

• Is the Forex Broker regulated?
• Account Details: Ideally, your broker should offer either a selection of account types or some element of customizability. Competitive spreads and easy deposits/withdrawals are good indicators too.
• Number of Currency Pairs offered: The variety of currency pairs on offer, as well as the quantity, should be considered (the more of both, the better).
• Availability of Customer Service.
• Quality of the Trading Platform: look for a platform that is easy to use, straightforward and offers a collection of technical and analytical tools to enhance your trading experience.

Rank	Broker Name	Special Offer	Minimum Deposit	Spread	User Score	Maximum Leverage	Regulation	Start Trading
1	NordFX	55% Deposit Bonus	$10	0.0 Pips	96	1:1000	VFSC	Open Account
2	SGT Markets	Refer a friend $10	$500	0.0	95	1:400	IFSC	Open Account
3	OctaFX	50% Deposit Bonus	$100	0.4	94	1:500	IBC	Open Account
4	Exness	No	$1	0.1	93	1:2000	FCA,CySEC,IBC	Open Account
5	IC Markets	No	$200	0.0	92	1:500	ASIC	Open Account
6	Tickmill	$30 Welcome  Account	$100	0.0	91	1:500	FSA,FCA	Open Account
7	Axiory	$50 Deposit Bonus	$200	0.0	90	1:400	IFSC	Open Account
8	Justforex	100% Deposit Bonus	$1	0.0	89	1:3000	IFSC	Open Account
9	ThinkMarkets	No	$250	0.4	88	1:400	ASIC,FCA	Open Account
10	XM	$30 Welcome Account	$5	0.0	87	1:888	ASIC,FCA,IFSC	Open Account
11	FBS	$50 Welcome Account	$1	0.0	86	1:3000	IFSC	Open Account
12	HotForex	No	$5	0.0	85	1:1000	INC	Open Account