FUNDAMENTAL AND

SENTIMENTAL
ANALYSIS

FUNDAMENTAL ANALYSIS

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Fundamental analysis is a way of looking at the market by analyzing

economic, social, and political forces that affects the supply and
demand of an asset. If you think about it, this makes a whole lot of
sense! It is supply and demand that determines price.
Using supply and demand as an indicator of where price could be
headed is easy. The hard part is analyzing all the factors that affect
supply and demand.
In other words, you have to understand the reasons of why and
how certain events like an increase in
unemployment affect a country's
economy, and ultimately, the
level
of demand for its currency.

Later on in the course, you will learn which economic data

drives currency prices, and why they do so. You will know
who the Fed Chairman is and how retail sales data reflects
the economy. You'll be spitting out interest rates like
baseball statistics.

There are numerous websites which give the trader

basic information.
http://www.forexfactory.com/ (most often)
http://www.fxempire.com/
http://www.marketwatch.com/Bloomberg (Articles)
http://www.fxstreet.com/

Non-Farm
Payroll:
The employment report is released on the first Friday of every month by the Bureau of
Labour Statistics, providing data covering the previous month. The report contains
information on unemployment, job growth and payroll data, among other stats.
Out of the payroll data that is provided, the most important statistic that is analyzed is the
non-farm payroll data, which represents the total number of paid U.S. workers of any
business, excluding general government employees, private household employees,
employees of non-profit organizations that provide assistance to individuals, and farm
employees.

Gross Domestic Product (GDP)

The GDP report is another important economic indicators. It is the biggest measure of the
overall state of the economy. The GDP number is released at 8:30 am EST on the last day
of each quarter and it reflects the previous quarters activity. The GDP is the aggregate
(total) monetary value of all the goods and services produced by the entire economy
during the quarter being measured; this does not include international activity however.
The growth rate of GDP is the important number to look for.

Consumer Price Index (CPI):

The CPI report is the most widely used measure of inflation. This report is
released at 8:30 am EST around the 15th of each month and it reflects the
previous months data. CPI measures the change in the cost of a bundle of
consumer goods and services from month to month.

Interest Rates
Interest rates are one of the main driver in markets; all of the above
mentioned economic indicators are closely watched by the Federal Open
Market Committee in order to gauge the overall health of the economy. The
Fed can use the tools at its disposable to lower, raise, or leave interest rates
unchanged, depending on the evidence it has gathered on the health of the
economy. So while interest rates are the main driver of price action, all of the
above economic indicators are also very important

Inflation
Measuring inflation is a difficult problem for government statisticians. To
do this, a number of goods that are representative of the economy are put
together into what is referred to as a "market basket." The cost of this
basket is then compared over time. This results in a price index, which is
the cost of the market basket today as a percentage of the cost of that
identical basket in the starting year.
In North America, there are two main price indexes that measure inflation:
Consumer Price Index (CPI) - A measure of price changes in consumer goods
and services such as gasoline, food, clothing and automobiles. The CPI
measures price change from the perspective of the purchaser. U.S. CPI
data
can be found at the Bureau of Labor Statistics.
Producer Price Indexes (PPI) - A family of indexes that measure the average
change over time in selling prices by domestic producers of goods and
services. PPIs measure price change from the perspective of the seller. U.S.
PPI
data caninvestors
be foundfollow
at thethe
Bureau
of Labor
In general,
CPI more
thanStatistics.
the PPIs.

Yellen

An American economist and currently chairman of the Federal Reserve, the

central bank of the United States. For trading his speeches has a
significant role in market.

Unemployment Rate

The most important employment announcement occurs on the first Friday of

every month at 8:30 am EST. This announcement includes the unemployment
rate; which is the percentage of the work force that is unemployed, the
number of new jobs created, the average hours worked per week, and average
hourly earnings. This report often results in significant market movement. You
will often hear traders and analysts talking about NFP, this means Non-Farm
Employment report, and it is perhaps the one report each month that has the
greatest power to move the markets.

New Home Sales

An economic indicator of both the number and prices of existing single-family

homes, condos and co-op sales over a one-month period. The existing home
sales report is released monthly by the U.S. National Association of Realtors. It
a
is lagging indicator as it tends to react after a change in mortgage rates.

As a trader, you have to take all this

into consideration. It's up to you to
gauge how the market is feeling,
whether it is bullish or bearish.
Ultimately, it's also up to you to
find out how you want to
incorporate market sentiment into
your trading strategy. If you choose
to simply ignore market sentiment,
that's your choice. But hey, we're
telling you now, it's your loss!
Being able to gauge market
sentiment can be an important
tool
in your toolbox.

Frustration
Frightening

Nerves
Excited

Emotions

Impatience

Greed
Stress

Over
confidence

Double, triple, even quadruple-check you

orders
Always have a trading plan

Take profit on your winning trades

Take a step back from trading

Withdraw money from your account

Forget that perfect trade

Focus on the process, not the profits

Take baby steps when increasing your risk

Step away from the screen

Get a life