How do bankers trade forex? Part 3: The Fundamentals
Up Next: How do bankers trade forex? Part 4: Technical Analysis
Why do the markets go up and down? It’s the Fundamentals!
This is the most unknown area of the market & that’s because no one ‘except the bankers’ understand it and focus in on it. The majority of bandits in the retail market have no idea what’s going on.
I’ll run you through everything from central banks and economic data to the crazy geopolitical issues that impact the market.
Once you understand the Fundamentals everything else will start to make sense!
This is all about fundamental analysis the key fundamental drivers of the market it gives the currencies direction, now for those new traders who have been sort of all the Googling around or looking at indicators and using that the general trade direction or entry levels you’ve got it all wrong, right the whole financial market system whether it’s Forex, derivatives, futures anything it all comes back to the economic data, the fundamental drivers, now there’s a number of key components to this that you need to understand, it really does start with the central bank’s, once you understand the central bank’s and how they read the economic data, well then what you can do is you can forward project their thinking, by looking at the economic numbers and then reacting to what those outcomes are from the forecast.
So this may sound really complicated but it’s not, and you don’t need an economics degree to grasp the concept that’s all that actual versus variance, and what I’m talking about there with is with the central bank meetings as well as the economic data releases themselves.
The market projects the forecast and then reacts to the actual outcome, and that’s the way the financial market works it’s very simple, right but it does get complicated when there are certain things like geopolitical events Brexit for instance Donald Trump is creating all sorts of issues with this new tax reform also creating issues with North Korea etc etc you get the picture, those geopolitical events blow out the general flow of the economics or the key fundamental drivers which is the central banks and the economic data, but you take those geopolitical issues out, that’s when you get good trending markets and that’s what we sort of got at the moment with the FED they have been raising rates it gives us a general upward buy sentiment positive tone for the US dollar now all we have to do to look for those really low risk high probability trading opportunities, is to look at the data that matches the central bank’s sentiment, that’s strong numbers strong US numbers, you get that picture and then you overlay with your technicals and we’re getting very close to the overall big trading picture and methodology that you need to adopt, right.
It doesn’t mean you can’t include specific indicators and these things in there to enhance your probability of success but the fundamental drivers the fundamental analysis, okay and I know a lot of traders out there and a lot of educators for that matter, tell you to stay away from the fundamentals and that’s primarily because they’ve never actually learned them, they don’t understand them they never worked in the banks and anyone that actually says that ask yourself the question, how much experience have you really got? All right so what I’m gonna do is just bring you through a general slide show, it’s easier to explain the concept of the fundamentals through that, and then once we’ve gone through the slides I’ll come back and I’ll show you where we really connect to the market it’s using a product (one of Reuters products) Reuters Xenith, this is where your connection to the market with the news, the real-time economic data releases, and just a general momentum of what’s going through the market, all right, I’m sure this is going to be a bit of an eye-opener for you, so sit back and relax..
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