fundamentals and trading.
Fundamental analysis is a method of analysing financial markets with the purpose of price forecasting. Forex fundamental analysis focuses on the overall state of the economy, and researches various factors including interest rates, employment, GDP, international trade and manufacturing, as well as their relative impact on the value of the national currency they relate to.
HOW TO SETUP YOUR CALENDAR
WHAT IS IMPORTANT.
Not everything on the economical calendars are important. However, there are some important information that you need to pay attention to.
The Key Major Economic Indicators we should stay on top of :
- Interest Rates Changes
- Employment Related (Such as NFP)
In all the links provided on the right side of the screen under Economic Calendars, there will be either a filter or option tool. For the following example, I will be using Investing.com website as a sample.
1. SETTING IT ALL UP
Before you start learning how to read the calendar, learn how to set it up properly. I would strongly suggest you use either investing.com or myfxbook as their calendar is available for both Android and iOS devices. In this way, you will not be missing out information while you are on the go. From the above information, you will noticed that I have labeled them as A, B and C.
A: Importance of News
Some of the websites allows you to select currency and the importance. Investing.com is one of those. But generally, you want to see only Mid and High Impact News
B : Filter by Date
Generally, I like to set this to the current week. When in week, I can compare the news with my current week technical analysis.
C : Current Time
This is very important. Make sure you set the time accordingly to your timezone. I will touch on the importance of synchronizing this with your charts to understand the momentum of the “power” of the news.
2. how do you read the calendar
Once you have set it up, the next thing to do is to learn how to extract the information for your trading needs. Now, what is important is, do not stress yourself up with too much. Reading the calendar is just a tool for you, giving you a rough idea where the market might be moving. It is more of a WHAT IF, than a definite.
previous vs ACTUAL
Most of the time, you will be looking at Forecast and Previous column. For instance, based on the example above, you can see GBP released their GDP (QoQ) and (YoY). The previous GBP GDP (QoQ) got worst, because previous results was 0.5% and Actual is 0.0% but the GBP GDP (YoY) got better from previous -0.3% to 0.3%.
However, most of the time, you will have mixed results for a certain currency. What you want to do, is to sum it up. If there is more good results with little bad results, you will classified them as good mixed results. Below is a sample table that I have done to help me understand the potential movement of currency based on the economic calendar.
|STRONG PAIRS||WEAK PAIRS|
|REALLY STRONG||STRONG||MIXED STRONG||REALLY WEAK||WEAK||MIXED WEAK|
|29 Feb 2020|
Sample Table : Keeping Track of Fundamental News.
MIXED STRONG – WHO GOES INTO HERE
So if there is mixed results of a currency, but more good news than bad news, they go into this category. This is to remind me that I am not sure where the strength of the currency and I am gonna watch the market to see what happens.
STRONG – WHO GOES INTO HERE
If all the actual results are better than previous, I will place the currency into this category. Which means, I have some confidence that the currency will be strong for the day.
VERY STRONG – WHO GOES INTO HERE
This is something I always pray for when news are out. So for an example, if GBP (YoY) CPI News is due, and the previous was good, the forecast is worst but the actual news is good. This will usually give a lot of strength and movement to the pair. See below image for an example.
As for the weaker currency categories, it is simply the opposite.
IMPORTANCE OF KEEP TRACKING OF FUNDAMENTALS
It is good to keep track of fundamentals on a weekly basic, as they are tell tale signs of how certain currency is moving. However, there will be occasions that all news are hinting bad but the currency moves up north and you are sitting down wondering what went wrong.
Remember this, the economic calendar is a calendar of events. What it does not do is to keep track of important news such as a sudden resignation of a disliked minister, President Trump tweets, outbreak of virus or a riot. Such events can have some impact of the movement of currency.