2 Insightful Tips When Trading Fundamentals

2 Insightful Tips When Trading Fundamentals

When I began trading, I thought that news events controlled the markets. No matter what I did, I could not control my fate when it came to news events and how they played out. I remember early on in my trading journey trying to trade all the news events as if I would make billions of dollars from predicting the outcomes. As if!

One day when I opened a trade on a Friday just before NFP (thinking that I’d make so much), and that trade played out perfectly to a point. A point that I look back on and wish I wasn’t so greedy and also wasn’t so forgetful. Here is what happened that day…

I opened the trade and suffered a slight drawdown, but it was all blue skies from that moment after that. Until the moment where I forgot that I placed the trade HOURS after the NFP event had passed. When I eventually remembered that I had a trade open, trust me when I say my balance was meager.

Here is what I know now that I wish I knew then. These three things are things I would recommend to a newbie trader who also thinks the way I once did.

1. Look at Commitment of Traders (COT) Reports

Now, you must understand what the COT report represents and what you can find in this report. This report shows you where the traders are putting their money, what ratio of traders believe a particular bias etc. Read through these reports to go into the market armed with the knowledge that institutional traders use to make the big decisions in the markets.

Institutional traders look at this information to know where the liquidity lies and develop models and strategies to cover their positions and maximize profits for themselves and their investors.

2. Central Bank updates

A lot of the time to stay ahead of the pack, you need to READ! Read lots and lots of different information before it hits the masses. The Central Bank releases information on other fundamental factors that may occur in the short-term and the long-term, whether interest rates, inflation, unemployment numbers, and many other crucial statistics.

You can get a lot of information on the parliament’s views on the economy and interest rates, whether hawkish or dovish. More often than not, you can get so much information about the overall economy and state of a currency by reading this information. This information will help you determine the general directional bias and help you know to a certain extent when to belong and when to be short a Forex pair.

So, don’t make decisions blindly but through informed eyes and a strategic mind.

Happy trading, fellow Traders!

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Emmanuel Maphosa

Emmanuel Maphosa

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