Why Most Investors Experience Losses While Trading Fundamental Analysis
Price actions in the currency market is constantly being influenced by the forces of demand and supply and these has been reinforced by the emergence of the internet, as we now collate better fundamental information and news updates better than ever before. Ultimately, this makes us wonder why investors find it difficult to trade fundamental analysis.
How Investors Employ Fundamental Analysis
Investors, who are ardent watchers of fundamental analysis in the market, use it to plot predefined entry and exit points in the market. This is possible, when the trader is aware of the wider conditions that affect the currency of choice. The economic sentiments that is prevalent in our society today affects the forces of supply and demand, while the main issue of the strength of the economy and prevalent interest rates are increasingly important. The level of foreign investment in the local economy is proportional to the strength of the economy, the GDP and the trade balance as well.
Volatility in the forex market has drastically increased and this can eventually make traders lose money. Take non-farm payroll for instance, it always offers huge volatility and being able to trade this can make or mar you.
Timing your entry in the market cannot be determined by long term fundamentals, although it does drive longer term trends. Having long term fundamentals in mind while employing the use of technical analysis would enable you get over bought or oversold areas to pin your market entry. This is vital for long term traders.
You can avoid making losses if you are aware of the fact that while trading via fundamental analysis, it is possible to employ this technique in catching big profitable contrary trades. However, the real worries when trading fundamentals is the fact that an investor is required to think the way the wider investor thinks of the news and possibly and probably how the market watchers feel about them.
To be able to avoid seeing losses when trading fundamental analysis, then it would be wise to avoid trading short term news such as non-farm payroll. Long term fundamentals analysis is one sure way to establish good trends.
If you should trade fundamental analysis, then it is wise to avoid carrying it out in isolation and you’ll do best in the presence of friends. Also, since fundamental analysis is time dependent, it becomes imperative to design a unique trading system.