Monday, May 25, 2009

My Fundamental Perspective - forex gambling

Even though i believe in the influence of fundamental factors on the market movement but i am not a keen fundamentalist practitioner when it comes to forex trading. In my opinion using the fundamental is like a gambling game. I have come to this conclusion after some of my observational experiences failed to discover consistent patterns that i can rely for over 3 years now. Perhaps the experience fundamental traders could explain more about this but i have a point to tell you why i believe it a gamble

Let's us evaluate one intriguing fundamental situations that we face everyday.

Consider a situation where you have access to the major central bank staff who is responsible for the economic data release everyday. In which the case you are always been informed ahead of others about the results of economic data that will come out on daily basis. Where as the major crowds is behind you. Since you hold the knowledge of the results, you have the ultimate confidence to open trade position based on the economic data expectation. During the release event itself the uninformed crowds are becoming anxious where some will open their trade position according to the data and some others on the opposite. In an unexpected situation suddenly there are more major crowds opening their bet against you. So you are obviously losing because the crowds are not on your side where the most money party is the winner. So think about it again even having the knowledge of the data release may not help you much in this kind of situation.

My best observation of such case is during Non-Farm payroll data release where the market moves very fast in extra-ordinary volumes within minutes or seconds. Despite ofmy long time observation still i failed to discover consistent patterns to address the exact direction of the market and occasionally losing in this special event in forex trading.

It is one of my great challenge to understanding the forex fundamental that eventually making me losing my interest of studying them to the deepest level and nearly stop in doing so nowadays. I used to ignore the news release and stay away from trading during those turbulence hours. I believe it is enough just to know the fundamental factors shake the market temporarily and use technical indicators to measure the spill over and trade the correction part.

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