Forex fundamental analysis is the other side of forex trading.
It takes into consideration economic factors that influence the price of a currency pair, for example, interest rates and gross domestic product (GDP).
Fundamental analysis is also known as “macro-economics” because it looks at the big picture rather than just focusing on technicals.
How to do Fundamental Analysis in Forex Trading
So, you’ve decided to try a fundamental analysis trading strategy. What does that mean?
Simply put, fundamental analysis looks at economic data and statistics to make predictions about the future value of a currency pair.
You can use this information to inform your trading decisions and improve your likelihood of success.
If you’re new to forex trading, then it’s important for you to know how fundamental analysis differs from technical analysis.
Technical analysts focus on charting patterns in order to make predictions about future price movements based purely on price action rather than anything related directly to fundamentals (the economy).
This means they don’t take into account things like GDP growth or unemployment rates when deciding where prices will move next—they just look at charts instead!
In contrast, fundamental analysts believe that economic factors such as GDP growth rates matter greatly when trying to predict where currencies will go next because these numbers have historically been very good indicators of which way markets might trend over time in response – especially during periods of high volatility (such as during financial crises).
What are the benefits of Fundamental Analysis?
Fundamental analysis is the foundation of any investment strategy.
It is a long-term concept, and it’s meant for investors who want to maximize their profits over the long haul.
Due to its nature as a long-term strategy, fundamental analysis is also suitable for traders who don’t have large sums of money to invest initially but want to make sure that they’re still making good decisions on the market in order to avoid being wiped out completely by one bad trade.
The benefits of using fundamental analysis are numerous, but they can be summed up simply: You get more information about what’s happening in the market than if you were only relying on technical data alone
How to use Fundamental Analysis for your trading
Fundamental Analysis is a great way of finding the best trading opportunities, and it can also help you with finding entry and exit points.
It can even be used to find the best trading strategies, as well as tools and books that will help you on your path toward becoming successful in Forex trading.
Trading with trend-following strategies and fundamental analysis
Trend-following strategies are some of the most common and popular in forex.
They include moving averages, the relative strength index (RSI), Bollinger bands and more. These are all tools that can help you find trends and make profitable trades based on them.
In order to use these tools effectively, you need to know what fundamental analysis is and how it relates to trends.
Fundamental analysis refers to the study of markets from an economic point of view—it analyzes factors such as currency supply vs demand, GDP growth rates, and political changes in order to determine when it’s best for a trader or investor to enter or exit into a trade position with either long or short positions (or both).
How to combine fundamental analysis and technical analysis in your trading
If you’re just starting out, you may find it helpful to combine fundamental analysis with technical analysis.
In this case, fundamental analysis will help you identify the trend and confirm that it’s worth trading. Technical analysis will then help you determine the best entry and exit points for your trades.
- For example
If we’re looking at a currency pair that’s in an uptrend, we’ll want to keep an eye on economic reports from countries involved in trading this currency pair because they can influence its value by changing economic conditions or stock prices (which affect supply and demand). In this case, fundamental analysis determines whether or not our trade is worth taking; technical analysis helps us decide when exactly to enter and exit said trade (or how much risk is appropriate).
Is Fundamental Analysis better than Technical Analysis?
Fundamental analysis is not better than technical analysis, it’s just different. Both fundamental and technical analysis have their place in trading.
For example, if you’re looking at a stock that has been on a general trend upward over the last few years, then you could use either method to determine when to buy or sell that particular stock.
However, if you’re looking at an option in which there is less certainty about whether it will move up or down over time (for instance because there are multiple potential outcomes), then technical analysis will be more useful for this task.
Technical analysts tend to be more interested in short-term price movements while fundamental analysts focus on long-term movements and business cycles.
Forex Fundamental Analysis books: Which ones are the best?
1. The Forex Trading Bible
The Forex Trading Bible by John Person is an excellent book for beginners looking to get started with fundamental analysis.
2. The Complete Guide to Technical Analysis
The Complete Guide to Technical Analysis by Martin Pring is a comprehensive, thorough guide to technical analysis.
It’s not specifically focused on fundamental analysis, but it has chapters that cover fundamentals in detail and will be helpful for anyone trying to learn about both methods at once.
3. The Definitive Guide to Forex Trading
The Definitive Guide to Forex Trading by Nicholas Blakey-Milner is another great resource, especially if you’re new to the world of foreign exchange trading.
It’s easy to follow and covers all bases from beginning concepts through advanced concepts like volatility and other complex topics that can be difficult for beginners or even experienced traders!
I hope this article has given you an overview of what fundamental analysis is and how it can help you make smarter decisions about your trading.
If you have any questions, please leave a comment below and I’ll get back to you as soon as possible!