Note that as economic conditions change with time, so too will the correlations that may have been apparent. Hedging is the fourth of the Defensive Trading Essential Fundamental Forex Trading Strategies. Hedging is generally understood to be a way that a trader will protect their capital by taking an off-setting position, which, in the event of that trade not going in the direction you had expected will lessen your potential loss.

As a defensive trader, you should always have your trades set up in such a way that assumes the worst so that you are completely protected no matter the outcome, however, using a Hedging Strategy is an addition layer of protection that you can take for if you are concerned that that the trading climate may change without warning.

As a Defensive Trader, an example of this would be if you have a long term swing trade open for a currency and there is a unexpected change in the market direction due to a geopolitical or economical news release that is disrupting your position, but not such that you decide to close the initial position.

In Forex trading, this strategy best works when the two assets purchased are negatively correlated. See correlated assets above. The fifth and final of the Defensive Trading Essential Fundamental Forex Trading Strategies is News Trading. As we discussed at length in the Fundamental Forex Analysis for Defensive Trading , the importance of News releases cannot be underestimated.

It is the incremental release of economic data which is largely responsible for the supply and demand, and therefore price, of the asset or currency. In order to be able to take advantage of these releases of information you need to know when they are coming out. This is done through the use of an Economic Calendar. A word of warning, however, in this area: If you are a beginner trader, please exercise caution of trading the news. The movements of the assets can be exceptionally unpredictable.

Often the asset will trade sharply in a direction which is absolutely opposite to what logic would predict. This is a sure-fire way to lose money in a hard and fast game in which you are a small player. If you are interested in trading the News, perhaps watch a few rounds of the releases that interest you, such as NFP etc. Once you feel that you have a sufficiently well established understanding of how many pips and in what timeframes the asset moves then you may be able to enter the market on the subsequent occasion.

In order to see this, you will need to have the timeframes of the charts of the associated assets on quite low timeframes, 5 Minutes, for example.

Once this has taken place, you will be able to identify when the asset retraces. This will be a safer place to enter the market. Before you consider embarking on a career as a News Trader, it is essential that you have mastered the Defensive Trading Strategy and have all the calculations performed in advance of the news release. For the full list and explanation please see the Fundamental Analysis Economic Indicators for trading Forex , or for more on Forex Analysis check out the Technical Indicators for Defensive Trading.

Also remember that if you would like to Trade Forex you can set up your account in minutes and get started. If you need to brush up on your Defensive Trading, make sure to read through the Defensive Trading Principles.

Etoro is a trader and investors one stop shop for all assets and investments. They offer Cryptocurrencies, Stocks, Currencies and Commodities. In addition, they offer the widest range of professional grade traders and investors for you to shadow once you have completed the one-to-one coaching with Defensive Trading.

easyMarkets was formed by bankers and Forex experts and has been serving the forex market for 18 years. They are known for transparent pricing, fixed spreads and no commissions on deposits or withdrawals. Furthermore, they offer some of the best Technical Analysis services via Trading Central charting which is the ultimate too. Use the PsyQuation Leaderboard to find and follow top traders, discover your strengths and trade your edge.

Save my name, email, and website in this browser for the next time I comment. Stocks Cryptocurrencies NFTs Forex Commodities EFTs Analysis Guides Market Insights Investment Portfolios Courses. Sign in. your username. your password. Forgot your password? Get help. Privacy Policy. Create an account. your email. Password recovery. DEFENSIVE TRADING DISCOVER THE ART OF DEFENSIVE TRADING.

Home Forex 5 Essential Fundamental Forex Trading Strategies. If you would like to trade and invest in Alibaba Stock, you […]. If you only ever buy one book on trading, make it the […]. Canada CAD and the price of Crude Oil: Canada is a major exporter of oil and is therefore the two have a positive correlation.

Japan and Oil: Japan, on the other hand, is a large exporter of Oil, and therefore had a negative correlation to the price of Oil. Master the Trade with Fundamental Forex Trading Strategies for Defensive Trading. LEAVE A REPLY Cancel reply. Investors should always look for up-to-date information that can potentially or directly influence economic situations.

You cannot even imagine how much noise the news is going to make, not to mention a rapid share price change the next or even the same day. With fundamental strategies, the process is almost the same. The only difference is that you need to imagine the economy of the entire country instead of the major corporation where share prices are actually the local currency. The economic situation changes all the time across the world.

Different events can result in different outcomes that you can forecast using all the info that is open to the public. This is what makes fundamental Forex trading strategies safer to use compared to the stock market. This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.

Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks. The Use of Fundamental Forex Trading Strategies Fundamental tools make it possible to have a deeper understanding of the way how markets and trends move. How the Fundamental Approach Works To understand how to trade Forex fundamental news and other events, we need to think of the market conditions and economic environment in the world as well as in the country we live in.

Driving Forex Market Forces in Fundamental Analysis To understand how to trade fundamental Forex market news and events, we need to identify major driving forces. They include: Interest Rates. As a rule, this particular element has a huge effect on the local currency rate. It defines how strong it is going to be against other international currencies. Inflation Rates.

The market reaction depends on if the data came in above or below expectations, which causes the highest profit potential. Reports that occasionally match analysts' forecasts usually have a limited impact on financial markets, as traders expected them. How to trade fundamental news in forex follows a simple process but challenging to perform with consistent profits.

The first item a trader needs is an in-depth economic calendar that lists all releases. Most offer a rating based on their significance, a handy tool that allows traders to plan their trading day.

It is best to create alerts for each economic report. It will allow for a more efficient trading day, and traders will never miss an opportunity. There are many programs for scheduling events with reminders. A normal calendar will suffice. Since most reports follow the same monthly release pattern, traders should create an entry and set it to repeat each week or month, depending on the data frequency. In most cases, it will be on time, but traders should always double-check their alerts with an accurate economic calendar.

Traders can conveniently do it over the weekend for the trading week ahead, which creates the trading plan. It is best to set the alert for each event fifteen to thirty minutes before the release to have plenty of time to prepare the trades. Fundamental news trading comes with a volatility spike as traders react to the data. Some traders prefer to enter limit orders before the release but place tight stop-loss orders, which price action wipes out amid the increase in trading activity.

Others wait for the release and place a market order in the direction of the release. If the economic data was better than expected, they buy, and if it came in below estimates, they sell. This approach can also result in losses, as the initial reaction is often reversed. The safest way of any fundamental trading news strategy is to wait for a trend to develop after a release. It takes a few minutes, but traders will bypass the volatility that causes stop-loss orders to prematurely close trades that could turn a profit.

Placing a buy and sell order in the same currency pair makes no sense and is often confused with hedging a portfolio. It is a guaranteed approach to slowly bleed capital or lock up a portfolio before being forced to accept losses. One of the most overlooked aspects of trading fundamental news in forex is the broker. Since volatility can spike following a release, spreads increase.

Traders at brokers that lack access to deep liquidity pools will face requotes and unacceptable slippage. Brokers with cutting-edge technology infrastructure and better liquidity pools will provide traders an edge, fill orders for those who seek to trade through the increase in volatility and trading volumes and keep spreads within a range that can improve profitability.

Fundamental Forex analysis focuses on the underlying reasons why an asset is moving as it is in the market in order to attempt to anticipate the future likely moves. Fundamental Forex Trading Strategies are essential trading hacks to help you to maximize your Fundamental Forex Analysis to safely know where the profits are hiding in any given trading situation. Once you have mastered the Defensive Trading approach to Trading Forex , you are going to be ready to Fundamental Forex Trading Strategies.

Fundamental Forex Trading Strategies are usually applicable to any currency pair or asset and can be used in conjunction with the Defensive Trading strategy to trading as well as with one another. The first of the Defensive Trading Essential Fundamental Forex Trading Strategies is Market Sentiment. Market Sentiment is based on the cumulative opinion or attitude of traders towards a financial market, generally, or in relation to a particular security. In plain English that means that you are able to analyse how many long vs how many shot positions are currently open on an asset.

This us super useful as a trader because it provides great insight into what the overall view of the market is by all contributors. Of course, no matter what the asset, there will always be traders who are taking opposing positions, however, when one dominates the other then you will see a move in that direction because in the end, trading is game of supply and demand. The more demand for an asset, then the higher the price will be driven up.

The second of the Defensive Trading Essential Fundamental Forex Trading Strategies i the Carry Trade. A Carry Trade is made possible due to the interest rate differential between the two economies and therefore the currencies of the pair that you are interested in trading. This strategy works when a trader borrows a currency with a low interest rate and buys with it a currency with a high interest rate economy.

It is a very logical process when you stop and think about it. You borrow money at a low interest rate, then invest that money in a high interest investment, the difference between the two it then profit for the trader.

This strategy is very popular because it allows a trader to find profits in low-volatility areas and takes advantage of relatively stable markets. Especially when you consider that interest rates are reviewed quarterly, there is a lot of warning of a change in circumstances. This logic can then be taken further, whereby a trader will buy a currency whose interest rate is expected to go up, and to sell a currency whose interest rate is expected to go down.

This is a very nice trading opportunity. The third of the Defensive Trading Essential Fundamental Forex Trading Strategies is Correlated Assets. Correlated Assets are assets in the financial market that are said to have something in common and as such they have a tendency to move in relation to each other.

Two assets are said to be positively correlated when they move in a direct way to one another i. The assets are said to be negatively correlates when they move indirectly to one another, i.

Common correlations tend to be most predominant between currencies and commodities and equity indexes for example:. Japan, on the other hand, is a large exporter of Oil, and therefore had a negative correlation to the price of Oil.

A similar correlation exists between the USD and the price of GOLD. One will usually see an inverse relationship between these two assets so that a rise in the price of Gold will often take place at periods of a USD downturn. Check out our post for more on Country Specific Fundamental Forex Analysis. In order to properly visualise the correlations on the charts, we recommend using a trading platform that offers a correlation indicator which will overlay one chart on top of another so that you can see the convergence or divergence of the prices.

Note that as economic conditions change with time, so too will the correlations that may have been apparent. Hedging is the fourth of the Defensive Trading Essential Fundamental Forex Trading Strategies. Hedging is generally understood to be a way that a trader will protect their capital by taking an off-setting position, which, in the event of that trade not going in the direction you had expected will lessen your potential loss. As a defensive trader, you should always have your trades set up in such a way that assumes the worst so that you are completely protected no matter the outcome, however, using a Hedging Strategy is an addition layer of protection that you can take for if you are concerned that that the trading climate may change without warning.

As a Defensive Trader, an example of this would be if you have a long term swing trade open for a currency and there is a unexpected change in the market direction due to a geopolitical or economical news release that is disrupting your position, but not such that you decide to close the initial position.

In Forex trading, this strategy best works when the two assets purchased are negatively correlated. See correlated assets above. The fifth and final of the Defensive Trading Essential Fundamental Forex Trading Strategies is News Trading.

As we discussed at length in the Fundamental Forex Analysis for Defensive Trading , the importance of News releases cannot be underestimated. It is the incremental release of economic data which is largely responsible for the supply and demand, and therefore price, of the asset or currency.

In order to be able to take advantage of these releases of information you need to know when they are coming out. This is done through the use of an Economic Calendar. A word of warning, however, in this area: If you are a beginner trader, please exercise caution of trading the news.

The movements of the assets can be exceptionally unpredictable. Often the asset will trade sharply in a direction which is absolutely opposite to what logic would predict.

This is a sure-fire way to lose money in a hard and fast game in which you are a small player. If you are interested in trading the News, perhaps watch a few rounds of the releases that interest you, such as NFP etc. Once you feel that you have a sufficiently well established understanding of how many pips and in what timeframes the asset moves then you may be able to enter the market on the subsequent occasion.

In order to see this, you will need to have the timeframes of the charts of the associated assets on quite low timeframes, 5 Minutes, for example. Once this has taken place, you will be able to identify when the asset retraces. This will be a safer place to enter the market.

Before you consider embarking on a career as a News Trader, it is essential that you have mastered the Defensive Trading Strategy and have all the calculations performed in advance of the news release. For the full list and explanation please see the Fundamental Analysis Economic Indicators for trading Forex , or for more on Forex Analysis check out the Technical Indicators for Defensive Trading. Also remember that if you would like to Trade Forex you can set up your account in minutes and get started.

If you need to brush up on your Defensive Trading, make sure to read through the Defensive Trading Principles.

Etoro is a trader and investors one stop shop for all assets and investments. They offer Cryptocurrencies, Stocks, Currencies and Commodities. In addition, they offer the widest range of professional grade traders and investors for you to shadow once you have completed the one-to-one coaching with Defensive Trading.

easyMarkets was formed by bankers and Forex experts and has been serving the forex market for 18 years. They are known for transparent pricing, fixed spreads and no commissions on deposits or withdrawals. Furthermore, they offer some of the best Technical Analysis services via Trading Central charting which is the ultimate too.

Use the PsyQuation Leaderboard to find and follow top traders, discover your strengths and trade your edge. Save my name, email, and website in this browser for the next time I comment. Stocks Cryptocurrencies NFTs Forex Commodities EFTs Analysis Guides Market Insights Investment Portfolios Courses. Sign in.

your username. your password. Forgot your password? Get help. Privacy Policy. Create an account. your email. Password recovery. DEFENSIVE TRADING DISCOVER THE ART OF DEFENSIVE TRADING. Home Forex 5 Essential Fundamental Forex Trading Strategies. If you would like to trade and invest in Alibaba Stock, you […]. If you only ever buy one book on trading, make it the […]. Canada CAD and the price of Crude Oil: Canada is a major exporter of oil and is therefore the two have a positive correlation.

Japan and Oil: Japan, on the other hand, is a large exporter of Oil, and therefore had a negative correlation to the price of Oil. Master the Trade with Fundamental Forex Trading Strategies for Defensive Trading. LEAVE A REPLY Cancel reply. Please enter your comment!

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They take measures to keep the local currency as stable and strong against other currencies as possible. Investment Portfolios. TRY TELEGRAM SIGNALS. For instance, borrowing in JPY and converting them to USD to buy U. Latest updates Latest updates. Since most reports follow the same monthly release pattern, traders should create an entry and set it to repeat each week or month, depending on the data frequency.

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