Fundamental Background Readings For FX Traders

Forex Market Education 

Fundamental studies are just as important as technical.

Today, with the proliferation of trading platforms and the power of the internet to deliver more information at faster speeds, I find that overall, there is a complete dearth of market fundamentals education to help the trader frame better decisions.

The problem with the trading industry today is that in it's readiness to satisfy customer demand with information tailor-made to the tip, it often by-passes the most fundamental aspects of price determination for a currency, stock, commodity and bond. People want to look at charts, identify patterns an use those patterns as a basis for making fast trading decisions. OK. But in catering to consumer demand and the manner in which how consumers want their information pre-loaded, such concise technical information may come at a very steep price: the complete loss of understanding of the market fundamentals of demand and supply. 

Let us take a look at the largest speculators in the currency trading arena that push prices above and below the equilibrium of market forces of supply and demand. These are the hedge funds who operate several strategies; chief of which is the long/short and the global macro strategy. Hedge funds analyze macro-economic data between different regions i.e Europe and USA and compare interest rate pricing and trends, inflation, unemployment and the manufacture and export of goods and services. For example take the last three years comparison between Europe and USA and then you would be able to fathom the primary reasons why the EUR/ USD had to drop from it's rate of 1.40 to the current 1.10 area. These large movements in currency valuation did not occur because of an array of technical indicators convincing hedge funds to short the EUR/ USD. The collapse in the currency pair occurred as a result of fundamental macro-economic parameters which hedge funds would have ascertained through their formulation of global macro strategy plans.

Questions and answers in market economics are at the very core of price action for a product. If crude oil is rising or falling in price then what is the current status of production and delivery and customer demand that drives the determination of those prices? Similarly, if gold bullion is rising in price, are their problems with current ore production or is the manufacture of jewellery rising rapidly being fuel by increased consumer demand? If the USD is in such strong favor at the moment does an analysis of US inflation figures and interest rates provide us with an answer to help us understand the nature of price action?

Looking at charts alone and trying to make a decision can be very scary indeed. Is the Dow Jones going to crumble having reached a head and shoulders formation? is gold bullion going to bullet up when it hits the 505 retracement on the Fibonacci pattern on the last upwards move? Can a chart really and totally sum up the sum of all fears and possibilities? 

Please download for free at Bookboon the following books for a better understanding of market fundamentals:

1.  Foreign Exchange Market: An Introduction
by Prof. Dr AP Faure Rhodes University



http://bookboon.com/en/foreign-exchange-market-an-introduction-ebook  


and


2. Financial System: An Introduction
by Prof. Dr AP Faure Rhodes University

http://bookboon.com/en/financial-system-an-introduction-ebook 


and


3. Money Market: An Introduction
by Prof. Dr AP Faure Rhodes University

http://bookboon.com/en/money-market-an-introduction-ebook 
 
Trading the currency and all financial markets is not just about pulling down a few charts and identifying historic patterns. The past does not necessarily define the future. trading is about the core understanding of global macro-economics and the local micro-economics that make up the intrinsic valuation of a currency. A probability can only remain a probability. Speculative price growth often recoils as economic fundamentals enforce equilibrium. An education in fundamental economics of each market does not hold back the student from framing better judgements.

Pieter Bergli - Deloren Trust Holdings.

A non-profit commitment to provide education on the properties of currency markets


Disclaimer - U.S. Government Required Disclaimer - Commodity Futures Trading Commission

Futures  and Options trading involves risks of losses. No representation is  being made that any reader and account will or is likely to achieve  profits or losses similar to those that are being discussed on this blog  http://forexeducationperspective.blogspot.com/. The past performance of  any trading system or methodology discussed is not necessarily  indicative of future results.

CFTC  RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN  LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO  NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN  EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT,  IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED  TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE  DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE  THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR  TO THOSE SHOWN.

All  trades, patterns, charts, systems, etc., discussed in this blog  http://forexeducationperspective.blogspot.com/ are for educative and  illustrative purposes only and not to be construed as specific advisory  recommendations for actual trades. Disclaimer -   http://forexeducationperspective.blogspot.com/ bears no responsibility  for the trading actions of its readers.


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