Forex fundamental analysis training
Introduction:
Fundamental forex training is one of the most important topics in the world of financial transactions, which is important for anyone who wants to enter the foreign exchange market. Fundamental Forex studies and analyzes the economic, social and political factors of countries that have a direct impact on the value of currencies. This type of training helps traders use economic and political information to make better decisions about buying or selling currencies.
Learning Forex fundamentals allows traders to understand the fundamental factors affecting the financial markets. These factors include important economic announcements, economic results, monetary policies, political and social events, global developments and other factors that can affect the forex market. By having access to this information and the ability to analyze it correctly, traders can make more accurate predictions about the direction of currency movements, and in this way, they may be more profitable in their transactions. The application of fundamental forex training in the real world is very wide. Successful traders usually use fundamental information as one of their primary tools for making financial decisions. They closely follow economic news and events and analyze their impact on the forex market. In this way, they can evaluate the correctness of their decisions and determine the best time to enter or exit trades. In short, Forex Fundamentals training is the most fundamental part of financial trading training that helps traders to correctly analyze economic, political and social information and use it to achieve success in the Forex market.
The first part
Forex fundamental training
Here we are trying to show you a step-by-step tutorial on Forex Fundamentals in an almost comprehensive way. It is hoped that after reading this section, you will be able to recognize the economic factors affecting the forex market; After that, you will be able to discover your suitable asset in the forex market, and start trading in that currency pair.
How are Forex economic indicators used in market analysis and forecasting?
- Assessing economic health: Traders and analysts use Forex fundamental indicators to assess the overall health of a country’s economy. Indicators such as GDP growth, employment figures and consumer spending provide valuable insights into the strength or weakness of an economy, which in turn affects the value of its currency.
- Monetary policy forecasting: Central banks often use forex economic indicators to make monetary policy decisions. Traders closely monitor indicators such as interest rates, inflation rates, and retail sales to anticipate possible changes in central bank policies that have a significant impact on currency valuation.
- Market sentiment: Important economic indicators in forex can shape market sentiment and influence trader behavior. Positive indicators can increase confidence in a currency, leading to increased demand and potential growth, while negative indicators can lead to currency depreciation as traders adjust their positions based on the economic outlook.
- Forecasting the movement of the exchange rate: Traders and analysts try to predict future changes in the exchange rate by analyzing economic indicators and their historical relationships with the movements of the exchange rate. For example, if the employment number is better than expected, it may lead traders to predict a stronger currency.
Important factors of forex fundamentals
You can use news sites to use the economic calendar. The most important free news site is the Forex Factory site. In the economic calendar, you can see published statistics and statistics that are expected to be published in the future.
We look at some important and influential economic statistics:
- Interest Rate : The rate determined by the central banks of each country, and banks are required to provide banking services, including facilities and deposits, with those rates.
- Employment Reports : which includes the unemployment rate and the statistics of job seekers or unemployed people who have applied for unemployment insurance and the level of wages and salaries and other data related to employment.
- Trade Balance : It means the difference between a country’s imports and its exports, which has a direct effect on the level of demand for that country’s money. A deficit (negative balance) means that a country’s imports are greater than its exports, while a trade surplus (positive balance) indicates that a country’s exports are greater than its imports.
- Current Account : It is one of the two components of the country’s balance of payments. The current account is the total balance of “trade” and “net cash inflow and outflow” of a country. The current account surplus indicates that during a certain period, the value of the country’s foreign assets was higher than the country’s debt, while the current account deficit shows the opposite.
- Gross Domestic Product (GPD): Any change in GDP can have a big effect on that country’s currency. A sharp increase in GDP indicates that the country’s economy is getting stronger, which in turn makes the country’s currency stronger, especially if the market predicts an increase in interest rates.
- Consumer Price Index (CPI): shows the price level of goods for consumers and is a key indicator of inflation. Inflation control is one of the important tasks of any central bank, so CPI changes directly affect monetary policies. A rise in inflation could signal an interest rate hike, while a decrease in the consumer price index could signal a future rate cut by the central bank. If a country is in an inflationary economic cycle, which is measured by two indicators, CPI and PPI, that country keeps interest rates low to prevent the increase and exacerbation of inflation.
- Producer Price Index (PPI): This index measures the price that producers pay for raw materials (which lead to the production of final goods). A higher index indicates inflation in consumer prices in the future, while a lower index indicates the opposite.
- Purchasing Managers’ Index (PMI): It shows the activity of purchasing managers and is considered one of the leading indicators. It is generally the first indicator that shows an increase or decrease in future production, which can be a sign of strength or weakness in the manufacturing sector.
- Commodity Prices : Commodity prices have a great effect on both producers and consumers and are directly related to inflationary cycles. Lower prices of commodities such as oil have a direct effect on the transportation sector, resulting in lower product prices and lower inflation figures, while higher oil prices generally lead to higher transportation prices and higher inflation.
- National Credit Quality: Another reason we can have to reassess a country’s money is whether the national credit rating has improved or is worse than before according to the report of reputable rating agencies (such as Moody’s). Also, the announcement of a country’s intention to repay its debts has an impact on the quality of its credit rating.
- Non-Agricultural Sector Wage Data (FNP): Another forex economic indicator related to the United States of America is NFP or Non-Agricultural Sector Wage Data. This index represents the number of salaried employees in the United States and measures the rate of change in new jobs.
What is the impact of fundamental forex indicators on the market?
The impact of Forex economic indicators on the market is significant, as these indicators provide key information about the economic health and stability of a country. When fundamental indicators such as interest rates, employment figures, inflation rates, GDP growth and trade balance are released, they can significantly affect the value of a country’s currency. For example, if a country’s employment figures are better than expected, it could indicate a strong economy, leading to increased confidence in the currency and potentially increased demand for it. Conversely, if the inflation rate is higher than expected, it may lead to a depreciation of the currency.
Trading based on fundamental analysis is a very popular method that is often associated with the concept of buy-and-hold strategy (long-term trading) instead of being used in short-term trading. Some of the greatest investors, such as Warren Buffett and Benjamin Graham, base their investment decisions on fundamental analysis. In fact, fundamental analysis is more compatible with long-term and medium-term strategies than with swing and scalp strategies, and investors use this method more than traders. However, since with the help of fundamental analysis we will be able to identify the main trends and big market trends, this method of analysis will also help short-term traders. For example, by carefully and completely examining the market from the fundamental point of view and realizing the main and long-term trend of the market, the trader can only enter into short-term transactions that are in the direction of the main market trend in order to reduce the risk of his transactions.
Part II
Forex fundamental training for short-term and day traders
How to benefit from economic statistics in forex trading?
Most traders in the forex market do short-term and daily trades and avoid holding trades for a long time. Therefore, we will continue with important and practical tips for day traders to consider. You can use Forex Factory
site to get economic statistics .
Important and practical tips for Forex market traders that should be considered:
1- Big traders start trading according to (predicted statistics on news sites) before publishing the news.
2- Traders move the price of the currency pair in a slow or fluctuating manner towards “valuation of the new price according to the economic statistics that will be published” and when the news is broadcast, at a price whose value corresponds to the same news. be delivered
3- If the economic statistics are announced as predicted, the price will fluctuate in the same range and the price will continue to move according to the previous trend, and after the announcement of the economic statistics, the price will not react much.
4- If the published news is better than the predicted number, the price will react quickly and the price will correct its value and grow more than before.
5- If the published news is announced to be worse than the predicted number, the price will react quickly and the price will correct its value according to the new price and will decrease quickly.
Result
Forex economic indicators are important components of market analysis and forecasting. These indicators provide important insights into the economic health and stability of countries, shaping market sentiment and influencing currency valuations. Traders and analysts use fundamental indicators to assess economic health, predict monetary policy decisions, gauge market sentiment, and predict changes in exchange rates. Therefore, a comprehensive understanding of Forex fundamental indicators is essential for anyone who is active in the field of Forex, including all long-term traders (Swing Trader) and short-term (Day Trader).
