Trading on the Fundamentals
I agree, one needs a good combination of fundamentals and technical skills to be a profitable trader.
Sure.. without technical skills which is crucial to manage take profit and stop loss levels, fundamentals can be pretty useless. Hand in hand, they should be able to do wonders.
Combining fundamental analysis with technical analysis is really the best- making sure you form a good trading strategy from a well mixed proportion of both. Never underrate the macroeconomic data released in the forex- especially the interest rates from the 8 global central banks. They wield the biggest power in price movements notably in the forex. Surprise interest rates can prompt powerful volatility in the forex. These interest rates are responses (though not direct) to economic indicators recorded for the month.
In using fundamental a trader need to asses or analyze the economic situation and so pay close attention to economic indicator which can have a direct effect on a nation currency in the forex market.
A good number of trader in the forex are of the opinion that technical analysis is the only winning team in the forex, charts technicians who are engrossed with indicators, expert advisors etc. But you can't easily dispose of the fundamentals. Yes, most of the fluctuations in the forex comes after release of major news. Imagine a fundamental as important as interest rates or what a possible Federal Reserve interest rate hike holds for the EUR/USD.
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Understanding the fundamental drivers of currency rates is the foundation of grasping price movements. Here are some suggestions:
Get to know the major economic data reports from all the major economies.
Understand the importance of expectations versus actual outcomes. Anticipate alternative outcomes to better gauge how the market is really reacting.
Stay aware of the pricing in and pricing out of market expectations that occur in advance of data and events.
Factor incoming data and news into the major fundamental themes of interest rate expectations, economic growth prospects, inflation, and structural developments.
Be aware that technical and position related themes can overwhelm the fundamentals.