How to Pick High Probability Trades Using Fundamental Speed

No matter how much individual traders think that their trading has an influence on the forex market, the truth is that it doesn’t. The amount of money that most forex traders put in play is minuscule compared to the trades that the big players make – banks, governments and other large global financial institutions.

Because of this, it doesn’t always make sense to use the same rules that these major players follow – in fact, entering and leaving the market using a strategy known as fundamental speed can have a major effect on your profitability.

What is fundamental speed?

Fundamental speed is all about keeping track of key economic indicators that have a significant effect on the currencies that you are trading. By entering positions and then exiting them systematically when important fundamental events occur, investors can take advantage of high-impact economic releases. Examples of these types of releases include the consumer price index (CPI), interest rates, retail and home sales, unemployment, trade balances and consumer confidence.

What happens when a key economic indicator is released?

Surprisingly, the forex market doesn’t react instantaneously to major economic data. In fact, the market can often oscillate wildly and randomly for a couple of minutes after the release. It is only after this that the price moves in a direction that reflects the economic data. This is because the big players are jockeying for position – for example, a government may be trying to stabilize the currency after adverse economic data, or major banks may be looking to get the best rates in the aftermath of the announcement. Only once things have settled down can the individual trader start to take reasoned decisions.

How can individual traders capitalize?

First of all, traders should realize that trading on fundamental economic data only provides a few trading opportunities in any given day. Furthermore, if the economic data is neutral, then this is not a good trading opportunity. The risk is that traders jump into the market based on emotion, rather than making rational decisions about when to enter or exit. By following a well-established system, however, traders can use fundamental speed to develop high probability trading positions.

What are the other benefits?

When traders leverage fundamental speed, they spend less time analyzing charts – which can be particularly helpful for novice traders, since technical trading is often challenging for them. The other advantage is that traders know exactly when they need to trade – they can highlight the key events on the economic calendar, rather than trying to keep up 24 hours a day with the forex market.

About the Author
ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC. Our mission is to maximize the value our clients derive from their most precious commodity, "Time"! By offering advanced and innovative services, optimal customer care and perpetual devotion to our clients, we will ensure that their individual needs are always met as markets continue to evolve over time. Visit ForexTime to learn more [space height="20"] [social type="facebook"][/social] [social type="twitter"][/social] [social type="google-plus"][/social] [social type="youtube"][/social]

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