Best Approach To Trade Forex Fundamentals 2024

There are a lot of different theories and methods out there about trading with fundamental analysis.

You know.

Things like:

1. Yield differentials.
2. Carry trading.
3. Interest rate analysis.
4. Monetary policy.
5. Economic data.

All good stuff.

These factors influence the sentiment and create trends and opportunities in the Forex market.

But, let me tell you…

In this article, I’m going to show you something different from the average.

Something practical.

Effective.

And reliable.

In other words…

A method to trade fundamentals that is real, and NOT just theory.

Sounds interesting?

Cool.

How to trade Forex with fundamentals:

Let’s start with a real example.

Ok.

We are going to take some trade examples from the BeSomebodyFX Telegram channel which is the best one to follow for Forex signals with fundamental analysis.

With that said…

Let’s look at this trade:

Trade example with fundamentals and technicals together

What do you notice?

There’s the macro context, yes.

But not just that.

We can list the various elements that compose the complete analysis in three points:

1. Fundamental sentiment.
2. Seasonality.
3. Price action analysis.

Cool, right?

Yes.

So let’s get into its details…

The fundamental sentiment:

What exactly is that?

I mean…

Is it like an indicator to see the sentiment?

No.

So what is it?

Well…

The fundamental sentiment is the overall direction of the market, based on the dominant sentiment and the macro context.

A bit confusing?

I know.

So let me show you something to illustrate the point better:

How to use fundamental analysis effectively

In other words…

The macro sentiment creates the trend.

And that’s all there is to know.

So identifying that sentiment is the core of what fundamental analysis is about.

Does it make sense so far?

Ok.

Now you may be wondering about the next important part.

Which is?

How to identify that sentiment.

Let's get into its details…

What creates the fundamental story:

This is as you can imagine the most articulated part.

Because there is NO specific element to watch.

I mean, I would love to tell you that the CPI or GDP is all you need to watch.

But that wouldn’t be true.

The drivers of the sentiment can vary.

Sometimes it’s inflation.

Other times it’s something else.

So?

So the best thing you can do is to just keep yourself updated.

How do you do that?

You can follow ForexLive, and Efxdata:

Efxdata

Or…

One of my favorites.

Bloomberg market surveillance on Youtube:

Bloomberg market surveillance

These sources will keep you updated with the important stories going on across markets at any time.

Now, is that all there is to know?

No.

Because this trading approach wouldn’t be as effective as it is without another important element.

Price action:

Wait.

Did you think it was just about fundamentals?

It’s NOT.

You need to use technical analysis to identify the best entry point, stop loss level, and take profit level for your trades.

That’s a must.

For example, if the macro trend is bullish and the seasonal pattern is positive for a currency pair, you can use technical analysis to look for bullish setups, such as:

1. Bullish price action from a support level.
2. A break of resistance.
3. Bullish candlestick pattern on a higher timeframe.
4. Market structure breaks, such as a trendline or support and resistances.
5. And anything else you like to look at.

Makes sense?

Great.

Now that you know the three elements that make a complete approach, let’s see how they work together in action.

Fundamental analysis in action:

Ok. Now that you know the basics of how to trade with this style, let’s look at some more examples of how it's applied.

Here are some of the most common fundamental elements that you can analyze:

1. Interest rates.
2. Economic data.
3. Yields and yields differentials.
4. Inflation.
5. Central banks’ communications and forward guidance.

But wait.

Because you know…

I like practice.

So let’s use REAL trade examples.

Let’s start with this:

Fundamentals in action

Again…

It’s a macro bias with in this case the sentiment from the FOMC meeting.

Combined with technical details, which in this case is the bearish pin bar mentioned.

And then also a bit of seasonal context.

Now here’s another example:

Price action backed by fundamentals

In this case, price action is mentioned first.

But…

It’s NOT just that.

The technical pattern is backed by the macro context with the BoE rate decision.

Makes sense?

Ok.

Now let me ask you something…

Did you notice a recurring theme in the examples above?

Yes.

It’s NOT just about fundamentals.

There’s always some technicals attached to it.

And that’s where it gets interesting.

And I mean, REALLY interesting.

Let me show you…

Combining technicals and fundamentals:

As you can see, this approach can help you understand the sentiment and the underlying forces that drive the trends.

It’s useful, a lot.

I know.

But with that said…

Fundamental analysis alone is NOT the complete picture.

That’s right.

But why?

Because you also need to use technical analysis to complement the approach.

What do I mean?

Well, I mean that technicals can help you time and confirm the best entry for your trades, the best levels to place your stop loss, and also where to place the take profit.

Yes.

So it complements fundamentals VERY effectively.

Because this way you can time your entry well and manage your risk reward appropriately.

But ok, enough theory again.

Here’s a post that explains this in practice:

Price action and fundamentals combined

And there you go.

That’s the way to combine both technicals and fundamentals.

Now…

What are some good price action patterns to use?

Here are some well known and effective price patterns:

1. Engulfing candles.
2. Pin bars.
3. Wedges.
4. Double tops and bottoms.
5. Penannts.

Of course, these are just some of the most popular and effective technical patterns that you can use in your trading.

There’s a lot more.

If you want to dive a bit deeper into that.

Youtube has some useful content:

Technical analysis on Youtube

And of course…

You can find more on Google too:

Definitions of price action and technicals on Google

Ok.

With that said…

Where to learn about Forex fundamentals:

Alright. You should have a basic idea of how to trade with fundamentals, and how to combine it with technicals to improve your trading results.

But, if you want to dive deeper into the subject, and to stay updated with the latest market news and analysis, you need to use reliable and reputable sources of information.

What are those?

Well, you can keep follow the best websites for fundamentals.

So, sites like:

1. BeSomebodyFX.
2. Bloomberg.
3. ForexLive.

That’s also where you can learn more about this trading style, and how to use it effectively in your trading.

But wait…

Is all this really useful?

Well, good question.

And the answer is simple…

Yes.

But why?

Let me tell you:

1. This type of analysis helps you understand the trend.
2. It helps you align your trades with the most likely market direction.
3. It gives you an overall advantage in your trading.

And this makes the best method to trade Forex fundamentals:

Again…

1. Understand the fundamental trend of the market, based on the dominant sentiment and the macro context.
2. Use technical analysis and price action to look for setups.
3. Combine everything to get the best context to trade with.

That’s all there is to know.

It’s a solid base to get you started in the right direction.

Now the next step would be to see it in action.

How to do that?

By following the best signal providers for Forex trading and seeing their trades in action.

That’s how you build experience.

That’s how you get your trading to the next level.

Experience.

Yes.

It matters.