Forex Fundamental Analysis

Fundamentals are what create trends and break them down. Charts are simply a picture of what happened after the fact.

Forex fundamental analysis involves the identification of measurable factors that determine the value of a currency. Specifically, factors that affect the supply and demand for a country's currency are evaluated when the fundamental analyst makes his or her trading decisions. Click here for Investopedia's definition of forex fundamental analysis.

It is often difficult for the fundamental analyst to make predictions of price movement under current market conditions since the forex market tends to anticipate events in advance, and adjust itself accordingly. For this reason, forex fundamental analysis is an important part of trading, but cannot be used alone to make sound short term trading decisions.

Since a significant part of forex fundamental analysis is human perception, several analysts could look at the same exact data and each come up with a different opinion for their price movement predictions. That is why I like to simplify forex fundamental analysis and look at it very simply as supply vs. demand.

I can't possibly know or learn all the factors that will determine a currency's value over the short time frame that I will be trading it, so I depend on tools that allow me to see the supply vs. demand graph of each currency with respect to the others for the short period of time prior to and during my trading window.

Currencies showing strength are in demand, and currencies showing weakness are not. Since currencies trade in pairs, I simply match a currency that is in high demand with a currency having little or no demand. Supply remains constant for the major currencies during the short time frame for my trades, so demand is all I need to focus on.

The Currency and Strength Meters used in the Trend Zone - Forex Trading Strategy show me all the fundamental data I need to see on one screen. In the figure below, the Currency Meter clearly shows that the US dollar (USD) is in high demand with respect to the British Pound (GBP) which has little or no demand at this time.

All other variables and factors need not be considered. We need to know the supply vs. demand characteristics of the currencies now because we're looking to make a trade now.

It clearly shows that the GBP (blue line) has been in weak demand over that course of time and is weaking further as time goes forward. It also clearly shows that the USD (red line) has been in high demand over that course of time and is strengthening further as time goes forward.

I captured an 18 pip profit by going short the GBP/USD pair at 1.4306 and covering the short position at 1.4288. This trade took a bit longer to develop than most and lasted approximately 30 minutes. It yielded a profit of $90.00 USD since I was trading a lot size worth $5 per pip. Here's the activity log from my trading account:

The cost of the guide is only $34.99 USD, and to show my appreciation if you decide to buy it I'll send you the Currency Meter for free as well as a discount code that will save you $250.00 if you decide to purchase the 4XPilot Strength Meter to complete the package.