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[JImmy-Trader]

Don't believe that fundamentals don't matter in the short term because they matter very much. Two examples from Thursday October 9th.

1) German Industrial Production was down 2.5% worse than expected. EURUSD tumbled 50 points.

2) Weekly jobless claims were about 15,000 better than expected. EURUSD tumbled another 50 points, then more.

October 7th

1) U.K. Industrial Production fell 0.8 versus rise of 0.2 expected.
GBPUSD tumbled 100 points.

October 6th

1) EUROZONE retail sales plus 0.1 versus -0.5 expected. No immediate reaction (market was focused on getting the stops below 1.1550), by end of day EURUSD moonbeamed.

October 3rd

Non-Farm payrolls 87,000 better than expected, prior month revised up 50,000. EURUSD collapsed.

Could go on and on. trust me. I base my trades off the news; I consider the technical condition of the market (for example when initial claims came out today EURUSD was on the ropes, didn't take much to knock it out), and I use 30 minute charts with simple moving averages ( I choose a lot longer number of periods in my moving average and find I get in a little later and a lot safer. Essentially I dont catch the turn I catch the acceleration period of the move).

Any meaningful thoughts would be appreciated. Please don't be too harsh. Unless you have something constructive to add please refrain from replying negatively without a reasonable case for being so (include examples please).

[domfos]

... what moving averages do you use?

[neil4x]

Hi Jim
I like to trade range breakouts in conjunction with fundamental news, who do you use for your news alerts?

[JImmy-Trader]

Hi Neil

I have all the government and other relevant websites in favorite places. I zero in on the indicator coming out. Usually the info is posted promptly at the release time.

JIMMY

[mishak]

Right, Jimmy, I agree with you about fundamentals. You gave good factual examples.

I would emphasize the one word you have used in your descriptions - UNexpected

We were lucky this week that economic indicators were really unexpected. It makes quotes to move.
If one is a daytrader, he/she better not sleep 5 minutes before the figures are published.

Otherwise, if figures come out near the expectations, the market reaction could be flabby. It happens because the forecast is already priced into the market (because the forecast comes out a few days before).

One should pay special attention to the expected interest rate change by national central banks.
Markets form their attitude to the rate change long before it really happens. So they start to adjust their positions some days before the event. Forex prices are moving correspondingly.
When at last it happens and the central bank does when everybody expected, the market reaction could be opposite - just straightforward take profit. And here is the catch for daytraders.

[mishak]

If you have an on-line account with some broker (it could be even a free demo account), they usually include news feed with trading or charting platform. So, just know the Weekly Calendar and watch over.

People here in the North America have CNBC at daytime, they cover US figures' news very quick.

In the UK, you probably have "CNBC World Market" all day long. They are better than US issue because the cover forex very well, news and analysis of forex prices' movements.

In Vancouver, Canada I have them only (at night) on special cases - the war with Iraq or after 9/11 towers.
Canadian business channel RobTV is better for forex (than CNBC) as they have major currencies on the ticker all day long.

So, watch business TV channel if you have it for free or subscribe for free demo with an internet forex broker.

Good luck

[eternalfuture]

Jimmy Trader,

Just a thought from me about trading the fundamentals.

Indeed it could be profitable to trade based on fundamentals, as long as there are gaps between expectations and the results.

All your examples are indicating that there are gaps between expectations and results.

When the gap is nearly non-existent, well, usually the market is stable.

I agree with mishak, when trading fundamentals, always expect the unexpected.

Do you remember when the last several ZEW index was released? The reaction was actually negative for euro. So did the reaction towards the improving ifo index.

There was a spike in euro/usd, but it was too small for such a leap in index. If I am not wrong, it was less than 50 pips.


Anyway, that time I concluded that no matter how good German economic figures, the market sentiment towards euro was too sour. Besides, technically, the euro chart was bearish and was about hitting 1.0760 at that time.

I used to watch US economic indicators rather than European and Japanese figures. The market is more sensitive to US data.

Hope my opinions helps.

Good luck!

[JImmy-Trader]

Excellent point about market expectations, the key is unexpected.
I agree totally. Good point. The expected would already be in the current price.

Also, the technical condition of the USD and the currency you choose to pair it against is key. For example, last Friday French industrial production came out about a percent less than expected and the EURUSD rallied.

Was a clear hint that the selling that needed tro be done in EURUSD was done the day before. It also means the market was expecting a bad number because the day before the official 2003 GDP forecast for france was revised from 0.8 to 0.2

Lastly, U.S. numbers have more impact than European numbers, as was so intelligently pointed out. That assessment was made in a recent New York Fed article. If you wish to read it the link is:
http://www.ny.frb.org/newsevents/news/research/2003/rp031007.html

Thanks for your insight and suggestions. JIMMY

[Deon]

I totaly agree that some fundamentals make the market move especially those from the US as well as the interest rate announcements from BOE and EU.

The expected figures are discounted in the price before the anouncement is made. Now, to move the market, the figures in the anouncement must shock the market. Thus, differ a lot from the expected figure. The example on the jobless has another catch. 400 000 is an important figure. A small difference from the expected figure taking it over 400 000 will have the same effect as a big difference.

Another thing to take into consideration on fundamentals are fundamentals announced on the same time with conflicting figures for example one fundamental with beter than expected figures and one with worse than expecting fugures. With these anouncements you normally get a whipplash. Here the market normally take a wile to digest the news before taking direction.

I find it helpfull to know which fundamentals influence the market because it help a lot to know when expected moves will occur.

[JImmy-Trader]

Good point. When two releases occur at the same time can be a whipsaw. can also be a majopr one two punch if both indicators indicate similar - for example next Wednesday we have retail sales and Empire Summary at 8:30am. My study tells me the empire will be in the 20s; market forecast is 16. Would be a great 10 minute trade if retail sales wasnt coming out as well. Foryunately, I suspect retail sales will surprise on the upside. If it doesnt I think it will be cars and nobody will make a big deal of it. Bottom Line: I will still try buying USD just before the numbers with a tight stop (no point doing a tight stop entry because if either number is even remotely good I will get put into position anyway.

Also when there are two important parts to a number the whipsaw factor can burn you.. For example, Canadian employment Friday. About 50,000 enetred the workforce and 50,000 left the workforce so the 8% headline flashed first. Market initially sold cad bought USD, Then when 50,000 jobs created (huge) flashed USDCAD collapsed.

Thanks for reply deon

[simon5]

very interesting Jimmy, you could post recos..., y totally agree with you about the fundamental perspective, y just find it a bit complicated in daytrading.
Exitos

[JImmy-Trader]

Thanks.

Simply put, current price in theory takes into account all known information. Part of the information is the economists guesses of what has changed in the past few weeks (at least thats the case with many monthly indicators).

When the economists are wrong about that has happened past few weeks (actual significantly different than consensus), a price adjustment takes place in the currency, stock, and bond market occurs to reflect this new information.

The magnitude of the price change relative to the news itself depends upon several factors:

1) How far the consensus was off.

2) How important the indicator is.

3) Technical condition of the market.

4) How soon the next scheduled news release occurs, and its importance relative to the prior release. Extreme example: On Wednesday October 15th, Empire Survey is at 8:30 and Retail Sales is at 8:30. Ordinarily the Empire Report is important; however this month retail sales will "steal the show".

What I have observed is that the price change in many cases far far exceeds what one would expect the price change to be given the deviation actual to consensus. I believe the reason is that scheduled economic news draws the attention of the big players and oftentimes long-term position adjustment decisions are made after the release of economic indicators, especially the bigger ones, such as Employment (the average range in EURUSD on the first Friday of the month is about 200 points.

When the long-term players buy or sell they unbalance demand/supply temporarily causing exagerated moves.

What I try to do is trade along with the big guys but instead of holding the trade for weeks or months, I hold the trade for hours and ride the wave of the temporarily overdone market. I am OK with buying a clearly overbought EURUSD intraday for example, because my studies tell me the overbought condition will persist for awhile; in many cases it will persist for as long as 24 hours, sometimes longer.

I hope this helps you more than it confuses you. I tend to be the only one who understands what I am saying when I babble on like this.

Good luck with your trading.

JIMMY

[neil4x]

Hi Jim, I don't think you are babbling at all, but I do find myself printing off your reply's and reading them a couple of times..

I followed the link from your web site on friday night to the Sierra Trading psychology web site and spent almost the entire weekend revising my trading and life goals as per the advice 'from brain to muscle with a lot less tussle'.

I have recorded my main goals and affirmations regarding my trading activity onto a tape to play as I go off to sleep and first thing in the morning.

What is your take on this side of things, have you used any trading psychology tapes or subliminal tapes.

When I first set out to study trading the first book I read was about this subject, it was 'The Disciplined Trader' and I think in some respects it has made me a little over cautios.

[JImmy-Trader]

Hi Neil

The disciplined trader is a good book.

You can be too cautious in trading and then wind up doing an emotional trade out of frustration. That happens to me a lot.

I had one hour a week sessions for over a year with a professional trading psychologist. It was very helpful, if not for nothing more then a way of talking to myself about my trading.

I was fortunate and my Bank paid for it. I would not recommend spending money doing it.

I'm glad you found the posting helpful.

All the best,

JIMMY

[HNN]

I totally agree with you Jimmy. I too follow the same approach as yours, but sometimes get caught in the whipsaw if the next scheduled news is too close. Like if one is released at 8.30 and before it can help make a big move, you get another release at 9.15. Which sometimes creates a whipsaw.

I like to wait for the initial fluctuations to get over and wait for it to make a move in a single direction. Then ride the wave. It mostly takes you all the way to your targets (If reasonable).


Enjoy your Trades.


HNN