Trading Fundamentals Based off Technicals
Market Analysis provided by A Teen Trader should be used for a education purposed only, trade what you are willing to lose
*This Article is from December and is being re opened*
Fundamentals are what fuels the market, these include: News Events (NFP, Interest Rates, FOMC, Etc), Speeches, and war/conflicts. When using fundamental analysis, people use it to attempt to measure the actual value of a currency pair. For Example: if the United States has a large increase in unemployment rates and Non-Farm payroll (NFP) is very negative compared to the foretasted numbers, we can expect a continuation of the trend (if we are in a downtrend) or a trend reversal. To find and read information about news related events you can just head here, Forex factory has a calendar containing the upcoming news events and break downs of what each event means and how the results could affect the currency it is associated with.
Technical analysis of course, is attempting to forecast future price movement based off of past price movement. In Forex we use things like candle sticks, candle patterns, support and resistance zones to trade this way. I cover these aspects of trading every day, so subscribe to get emails when i post if you haven’t already.
Trading Fundamentals Based off Technicals:
Trading fundamentals based off of technicals is actually much easier than you would expect. The few hours before the news events, the market leaves hints on to which ways the news will move the market. What I tend to Find the Most is, price will create a liquidity move before the news (a few hours) or right as the news drops, creating a massive wick. One tip i suggest when trading the news is, use SMALL size unless you are already positioned accordingly many hours prior to the news. This way you protect your capital.
15m Time Frame
USD/JPY: December 12, 2017
In this example, an announcement was made that Rand Paul will not vote for a tax bill, due to him promising Kentucky that he would not vote for ridiculous spending. His choice how ever, was bad the the USD causing selling pressure in the market. While it seems like predicting what he would say would be hard, it isn’t, we just have to look at the charts and find hints. If we look, the past 1.5 hours before the release, the market was rejecting a major resistance zone (the circled candles), indicating to me that we could see a move to the down side and potentially back to the major support zone. The confirmation to take a sell position is, the extremely bearish candle before the news candle. When taking this trade we would as usual look for a move from zone to zone, while having our stops around 1 pip above the highest wick that was created in the last 2 hours ensuring us with the best possible position in which to capitalize on this trade.
30m Time Frame
USD/JPY: December 13, 2017
In this, we had a lot of major news, we had interest rates (stayed as forecasted), we had FOMC , CORE CPI (was worse than expected) and Crude Oil Inventory (worse than expected). When we are in a trend and interest rates stay as expected, we can conclude that we will continue the current trend momentum, especially when all of the other news events that came out where negative. There were many hints we could have noticed throughout the day leading up to the news that could allow us to have capitalized on this move. If we take a look at the top 2 circles i have drawn, we can see that price was accumulating orders at a support, which means that more than likely we will smash through that zone and continue onto the next zone. If we look later into the day we see we did smash through that zone, but we ended up pulling back and testing the major support (now resistance) and the rejection of that zone would have been a key entry point for me personally. The News candle itself (yellow) was actually a doji, and after a doji candle we can usually expect a continuation of the current trend, which happened. On this set up, i would have been looking for entry positions (if i didn’t have any already), after the bearish candle that rejected from the support turned resistance, with a stop loss above the zone and Take Profit at the next major zone (112.55).
30m Time Frame
CAD/JPY. December 1, 2017
This News move was absolutely massive, over 110 pips in 30 minutes which is very rare for CAD/JPY. The news that was released on CJ was Employment change (Positive), GDP (positive), and unemployment rate (positive). All of these positive results are what caused CAD to Explode, but none the less this trade is extremely simple. We can notice a small uptrend and price making a lot of small waves. Which means that positions are being loaded up by banks and institutions, as the market makers are preparing for a bullish news event. The goal of the market maker before news events is to load up as many opposite direction positions as they can, so they can take your money.
Looking for an entry on this set up is very simple, as you can see we created a bullish engulfing at a fairly strong support zone and we had very good candle confirmation. On this trade you could have entered after the bullish engulfing, with a stop loss of 10 pips placing it below the zone in a very good position and have a Take profit of 30 pips(the upper minor zone drawn).
I do not recommend news trading for beginners or intermediate traders, you can lose a large amount of your account if done incorrectly, be smart when it comes to news and happy trading!