Fundamentals are inclusive of everything making up a country and its currency. A dynamic mix of distinct plans, erratic behaviors and unforeseen events, the fundamentals take under their jurisdiction everything between interest rates, central bank policies and natural disasters.
Speaking of fundamental analysis, it’s a great tool to study core elements that discretely influence – either by part or as a whole – a particular entity’s (stock, currency etc.) economy. Its attempts at analyzing several economic indicators (price action and trends, socio-political influences etc.) thus make predicting possible within set frameworks of business cycles. In simpler words, the clockwork of the markets moves on the gears and springs of fundamental analyses. Therefore, while anyone can tell the time, not everybody is a watchmaker. Perhaps this is what that gave traders the classifications of fundamental and technical, whereas the real benefit lies in a blended approach. Keeping an eye on the signals while staying updated on economic data and socio-political decisions is like pulling both the triggers at once.
But everything has a drawback and with fundamental analysis, it is an effective tool when forecasts are to be made on economic conditions; for exact market prices, however, you need to rely on the trader models using current and past empirical data. That makes it both an art and a science. However, one must understand not every development makes a certain currency move. Before you set your foot into it, identify the most influential contributors to make this mix work out smooth.
The skeptic shall still ask: “If it’s this simple, then why people face failure in the forex market?” The question is something like a double-edged sword; while answering the question is tough, looking at certain aspects may prove the same a piece of cake. A lot of blame can be put on the people who promote forex trading as the easiest way to make money; while this is true to the maximum extent, it bedims the risks in the public eye that this market is so (in) famous about. What most of us don’t understand is advantages in the forex market are subjected to a calculated approach; it’s not that you merely buy and sell the currencies to make your wallet inflate. Handled wrongly, these advantages have been noticed to land traders in trouble. So let’s see what people misinterpret.
24/7: The Forex market surely stays open for 24 hours a day, seven days a week, which make people think it to be a profit generating machine. But in reality, volatility doesn’t remain present on a 24/7 basis.
High Leverage: 100, 200 or 400x is a common thing in the forex market, but newcomers with mini accounts can easily get their respective accounts ripped off even by using a 100x margin in a single trade. Free resources don’t help much.
Getting rich in no time: Forex has earned the get rich quick epithet long time back, but in reality, forex trading is not for people who are not willing to invest time, energy and money. A few bucks may be sufficient to open an account and a high leverage is not everything that can help you make a fortune. Leverage is like a .50ACP; it just might fire the wrong way in inexperienced hands. Using it at a very high limit shall let you end your next millionaire dream real quick.
Of course there are other factors that cause Forex Titanic-s to capsize all in a sudden, but changing the mindset has been proven to be the life jackets saving many from untimely deaths.