Fundamental Analysis is Important for Forex Traders ~ theater of dreams

Most novice traders consider the economic and political analysis with the aim of determining the exchange rate in the future.

Economic and political analysis with the aim of determining the exchange rate in the future. fundamental analysis is not an instrument worthy of a study analysis because it is "only" news and not exactly like an effort to review or analysis of the price of a currency by using statistical data such as prices that have occurred, the average price, volume, etc. technical analysis. The opposite of this opinion, there are also some traders who use fundamental analysis in day trading but do not put it in proportion, so often times experience failure in learning forex analysis or even in their real trading.

This article is not intended to be patronizing or even try to change your trading style. This article aims only to enrich your knowledge of whether it you are a newbie in forex world, novice trader, or even a professional trader.
This time we will try to explore the questions above, especially the advantages and disadvantages of fundamental analysis. Why fundamental analysis is needed? If necessary, how far should the fundamental instruments used in trading?

What size?

Now questions like these that will be discussed together. Again, it is not possible to explain the fundamental analysis in only one article only. Especially if you have to change the way trade with someone. One thing that is expected of this article is to enrich your knowledge in the trade and prepare a trader beginner (rookie trader) in start real trading
The most important thing about Fundamental Analysis is: DRIVER IN PRICE!

The first time I learned analysis in the world of forex trading, I am very interested in the views up and down movement of the graph shown in the candlestick. That is why I began studying technical analysis in a comprehensive and even tend to praise him and had enough with technical analysis.
I am acquainted with a moving average. I was fascinated with how to predict the trend in a currency movements. Then I started studying other technical indicators. Well, I feel quite at that time. Then I started in a trading (fortunately not in real trading!). And what happens is I suffered massive losses.
Of course I was not upset by what happened with my account. Yes, of course, because it is a demo account. However, the incident undermined my confidence in what I had learned at that time (there may be some of the brothers had also experienced the same thing.)

In my head appears a simple question: Why is my technical analysis is not accurate? Well, I've been using Moving Average properly. I've also added some other indicators that I know the time including the indicators to determine overbought and oversold as the RSI or Stochastic Oscillator. But despite all my technical indicators have shown the same direction, why exactly is happening on the contrary the price?

From there I find out the cause prices to move against the technical condition that occurs at that time. And, I found the answer lay in the so-called: economic events. Language simple it is news. Yes, news. Although at that time, all technical indicators show the graph moves up, what happens is instead continue to move down the price continue what had happened. And it was caused by news of the country concerned.
This is what you need to know. Perhaps many know but few are aware. News is the activator in a money market. That's why there are fundamental analysis!

Although the statistical results of technical analysis indicates the price should go up in terms of various indicators, but if indeed the news that there are actually referring to the price moves down, there is no single party able to refute it. This is due to any trader holds the same: a fundamental news (whether it's the survey results, whether it's monetary policy, or just a mere issue) to determine whether the country concerned Economy in good health or not.

My friend even a simple conclusion: stronger fundamentals than technical. Statements that can not be denied (though if you are a fundamentalist extreme, you also should know that faster technical and objective).
That is why fundamental analysis is important for a trader. You can not conduct a massive sell just because the chart and instrument analysis showed a trend down but in the meantime the country concerned is to raise interest rates and currencies are in a weak opponent!

Remember, a graph is still a graph! Most indicators used previous data to predict the direction in front. In many circumstances, is valid. But not if a big news came on the market. The news like Non Farm Payroll, Interest Decission or CPI Food excl too dangerous for you to miss if you are trading with limited funds and rely solely on technical analysis instruments.
So, put this in your reference: News is driving the price. Not Done! Well if you already understand it, maybe now you are interested to learn about fundamental analysis, especially with various economic indicators existing. Few simple quiz, do you know what it is the Consumer Price Index, Interest Rate and Purchasing Manager's Index?

Hmm ... if not, it's time you start reading articles on the fundamentals of this website.
Then if up to here right? At the beginning of the article I alluded to earlier is that some traders think the exact opposite. They looked at each other because the economic news is the price-forming, then it is enough that it can be monitored and technical forgotten.

A fatal mistake for a day trader.

True, the economic news is the price-forming tendency. And sure you can analyze the news that will appear and then predict how the market reacts to the news.
But unfortunately not that simple.
Talk about economic news and how the market reacts to news is not talking about right and wrong or talk about the logic that should occur.

It is about market psychology. The psychology of millions of people in this world. All you need to understand is that the market does not care about the books you read or economic trends over the years. For example: A rise in interest rates. In a history lesson and we learned so far, if the interest rate a country has increased so quickly has resulted in the respective country's currency will strengthen. But is it always so? The answer is no! No need to explain at length, a few months ago (around January 2010) The Fed raises U.S. interest rates by 25 bp, know what happened? U.S. dollar even weaker! Most beginners do not understand why it happened. At first I was not. But in fact what happens is the market reacting immune to interest rate hikes this time because indeed the Fed has signaled a few days earlier and the increase has occurred several times. But who would expect such as the news has not appeared?

Well this is where the location of the point of balance occurs. Indeed trigger a fundamental indicator of price movement. Still, prices are formed in the hands of buyers and sellers. What is needed is to know the reaction of the majority of buyers and sellers to the news that appears. It could be argued this is often biased because it is not easy. Millions party is in foreign currency exchange and predict the majority of them is not an easy job.
That's why the day traders often make the fundamental news is not as decisive decision Buy / Sell them but more as a reference of what will happen to the price. They use technical analysis in taking a position because it is inexact to be more clear.
Well till here might have emerged a discourse within yourself. About which one is better, I think no one is better between technical and fundamental. But I want to emphasize here is that neither can stand alone and should be used to cover the weaknesses of one another.

Conclusion:
The advantages of fundamental analysis: - Drive price - Simple, you just may find out whether the increase, decrease or remain. Unlike the technical need to use numbers.

Disadvantages:
- Often are subjective due to market psychology

- Unable to answer the needs exactly. Remember that the basis of fundamental analysis is not mathematics, but economics and market psychology.

Up here you can conclude that it is fundamentally necessary. Technical also necessary. So, do not repeat my mistake once it was only Fundamental Analysis holds a basket of useless junk news. Those who hold such usually consist of two groups: the first group are those who have capital to be able to withstand large price movements caused by the emergence of news or second class to those who are too naive in the trade.

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