Thursday, March 12, 2015

One month anniversary of fundamental trading

Well I've been trading fundamentals on the daily chart for a month now. How's it been?

Pretty good. I finished the last four weeks up 2% on my live account, trading conservatively (0.25%-1% risk per trade). I only opened 17 trades though, so it's not a big sample. 

My observations:

- if you're trading discretionary, studying fundamentals will add alot of confidence to your trades. You understand what the big money is doing.

- it's easier to spot retracements vs reversals (if price is moving against fundamentals, assume it's a retracement). This is quite different from pure technical analysis, where it can be very difficult to differentiate retracements from reversals, at least until it's too late. 

- daily price movement is influenced primarily by fundamentals. If you're trading the daily charts, studying the news will help greatly. 

- transaction costs on the daily chart is almost trivial (usually 2-3% of the total trade). I've always known this, but it makes trading so much easier versus trading on the 5M charts where transaction costs can eat up 10%-20% of your trade.

- it is boring. In fact I get pretty restless if I don't have a trade going. I try to keep myself occupied by doing technical and quantitative analysis, just to improve my technical knowledge. 

- fundamental analysis doesn't take that long. Seriously. I probably spend about 4 hours per week on fundamental / news analysis. Studying the major news on the forex factory calendar is pretty simple. Put the results of each news release into a spreadsheet, and spend a few minutes on deciding how price will be affected. If you're unsure, try to read a few news articles from sites like bloomberg, reuters or fxstreet. It really isn't that hard. 

- keeping to your SL and TP can be tricky, at least for me. Because trades take longer to complete, there's more opportunity to mess around with your trade. 

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