The Use of Fundamental Analysis in Forex Trading is Very Profitable for Beginner
If interpreted simply, fundamental analysis studies the economic and political state of a country and estimates its impact on the value of the country’s currency. Forex traders who use fundamental analysis must keep abreast of various economic data such as inflation, interest rates, unemployment rates, and other important news on the market.
Economic data will be announced by the government, then independent institutions that will collect and analyze it. Traders will use some economic data to find out how the economic condition of a country.
When economic reports are improving, it is very likely that investors are interested in investing in the country. Increasing demand for domestic currency will ultimately affect the value of the country’s currency.
Important Data on the Economy
There are lots of useful economic data that traders can use. However, not all economic data can be used and have a significant influence on the value of a currency.
In order to make it easier for you to get important economic data. The next explanation will discuss some important economic data to be considered.
This economic data was released by the US labor bureau which measures changes in the number of workers in the previous month, but not including the agricultural industry. NFP is usually released once a month on the first Friday.
The creation of employment opportunities is an important indicator of the level of public spending and this is an important indicator in all economic activities.
When the data released is better than expected, this will give a positive sentiment for the USD.
This data is the percentage of the total workforce who do not have a job and are actively looking for work. The figures released are data collected in the previous month.
The unemployment rate is an important indicator that is useful for measuring the level of economic health of a country. This can happen because the level of public consumption is closely related to conditions in the labor sector.
This data is also closely monitored by the Central Bank as a material consideration for setting monetary policy.
When the data released is greater than expected, this will have a negative effect on the currency in question.
This data is a reference interest rate issued by the Central Bank. Short-term interest rates are a very important factor to influence the value of a currency.
When interest rates increase, the market will respond by appreciating the currency. Likewise, the declining interest rate will make the currency weaken or depreciate.
Important Benefits of Fundamental Analysis for Traders
The fundamental analysis that you have can be used as a guide to determine the strategy that will be used in transactions. Owned guidelines will determine when is the best time to enter and exit the market. You can also find out when is the best moment to buy and sell currencies.
Accurate forex analysis can produce a mature strategy from a trader. Never trade without using a good and mature analysis. The risk that you will get is the loss that occurs because of the immaturity of the strategy you make.
You can use good fundamental analysis to get a bigger profit. You can still get a profit when you don’t do the analysis, but the profit you get comes from luck and won’t last long.
This is of course different when you can do analysis with careful calculations. The profit potential you get can be optimal and sustainable.
Reducing Loss Risk
A mature fundamental analysis will allow you to plan your eyes on the investments made. A good analysis allows you to react quickly when the opened position is in danger. You can get out of the market quickly when you see the transaction turns out to be less profitable.
Broadly speaking, a good analysis will reduce the risk of loss that you can get in forex transactions.
Fundamental analysis includes simple techniques that we highly recommend to beginners who have minimal experience in the world of forex. Fundamental analysis is much simpler than technical analysis. So, this analysis is perfect for those of you who are just learning to do trading on the forex market.
Although simple, fundamental analysis can provide positive benefits for the forex trading that you do. So, never underestimate the fundamental analysis in transactions on the forex market.
Another important thing to note is to make sure you choose economic data that is important to use. Because, not all fundamental data have a significant influence on the currency market.
By implementing a simple strategy like the example above, we hope you can get the optimal profit in the forex activity that is done. Continue to hone good analytical skills so that the results obtained are more optimal.
If you have questions related to the above topic, please ask us through the comments column below. We will be happy to answer any questions that come in to help you all.
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