4 Common Mistakes Associated with Fundamental Analysis

0
160



Fundamental analysis is the study of the economic performance of a certain country. Since currencies are traded in pairs, you need to analyze the economic condition of the country to speculate the direction of the price movement. Things might be challenging for naïve traders because the concept of economics is really hard. But in real life trading, you can simplify the factors by using basic knowledge of the fundamental analysis. For instance, learn about the impact of interest rate change decision in the Forex market. By following the concept of the interest rate change, you can find the direction of the trend. If a country hikes its interest rate, you can expect a strong bullish rally. On the other hand, cutting down the interest rate means the economic condition of the country is not that great.

Though fundamental analysis plays a crucial role in trading, very few traders actually know the proper way to deal with the complex price movement based on news data. Let’s highlight the common mistakes associated with the news trading strategy.

  1. Dealing with the press conference

You should learn to deal with the press conference in an effective way. Those who have strong analytical ability can trade during the press conference even though the market will exhibit wild swings. But very few traders have such technical skills to deal with the market data. At the initial stage, you should look for a stable market condition. Deal with your emotions while placing the trades in the volatile market condition. Limit the risk exposure by following a conservative technique and develop your skills by learning from the losing trades. However, those who don’t have a strong analytical ability should never try to trade such market data.

  1. Dealing with the rumors

Trading is an elite class profession.  Search for the term Forex Australia and you will be able to learn many things about this market. Start working hard about the news analysis so that you don’t have to lose trades by trading the rumors. But filtering out the key news in this chaotic market is a very tough task. You might think that depending on the reliable trading blogs is the easiest way to keep your fund safe.

At the initial stage, think about the safety of your investment. Stop placing random trades with high risk during the major rumors. Wait in the sidelines and try to find the truth about the market.

  1. Relying too much on the fundamental data

Relying blindly on the fundamental data is a very big mistake. If you want to keep your investment safe, you should learn to become a safe player. Trading with high risk and trying to earn a huge amount of money on the major news is a very big mistake. Think about the safety of your trading capital. Let’s assume you know the process of analyzing the fundamental data. Do you really think you can make a change to your life based on fundamental data only? The obvious answer is no. To keep your fund safe, you should rely on the long term goals. Blend technical and fundamental data so that you can find the best possible trades in the market. Ignore the complicated price movement and try to use a simplified trading method to make a big change to your life.

  1. Risking too much

The intermediate and advanced traders often start taking a high risk to secure their financial freedom. But this is not the way by which the retail traders should place any trade. You must not risk any amount of money by which you can lose big trades. Start using traditional risk management plan and try to improve your basic knowledge so that you can become the best trader without losing too much money. Use a simple approach and never become an overconfident trader since it can result in a big loss.

LEAVE A REPLY

Please enter your comment!
Please enter your name here