Can one make money in forex trading using fundamental analysis? In my opinion, "No". Fundamentals don't really work in forex trading. I can give 100s of examples. Fundamentally speaking a currency should strengthen when the interest rate of a country rises. But we normally see market moving in opposite direction.
How many times have we seen market moving in opposite direction after the data? How many times have we seen a positive US data making US dollar weak or negative US data making US dollar strong? We normally read in the financial journals "US Dollar strengthened due to..." or " US dollar weakened due to growing concern over Job market" I agree that if a job less rate is going up it signifies that the economic condition of a country is deteriorating. But why does currency get stronger next day after the data? Does economy stop shrinking in a day? We read in news wire that Euro and GBP fell due to Dubai crisis.
But next day both started moving upwards. Is the crisis over in 1 day? USD fell after 9/11 attack. But after few hours the uptrend continued. I can give 1000s of examples for market moving in opposite direction of the data. This clearly shows how dangerous it is to trade based on fundamentals. I did not mean that one must ignore data releases. We always see good movement after data releases. I have listed some of the data that can move market well. One may ignore the data but not the timings. Use the data effect for taking a position or closing the positions. Move stop loss closer to market and secure your profits.
We hardly see any data changing the mid term trend of the market. We can only see data and news changing the short term trend. In forex short term means few minutes to 1 or 2 days. I do many 'low risk high reward' trades during data. If there is an important data from UK, I may sell GBP seconds before the data with 20 pips stop loss and 100 pips target. That is if mid term trend of GBP is down. If data is good, my stop may get stopped and I may lose 20 pips and if data is bad, I may make 100 pips or more. Be prepared for a sudden big move during data releases.
Either move the stop close to market to avoid a big loss or remove profit limit and go for big profits.
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