Market fundamentals. Part 2 - Page 2
Page 2 of 92 FirstFirst 1234561252 ... LastLast
Results 11 to 20 of 913

Thread: Market fundamentals. Part 2

  1. #1
    Educator
    Join Date
    Jun 2013
    Posts
    1,103
    Thumbs Up
    Received: 579
    Given: 189

    Market fundamentals. Part 2

    Hi traders!

    First side of this topic you can find here

    We've started talking about behavior of "big buys" or "smart money" (institutional) players. Basic assumption is the following - they rarely come to the market and buy all they want.
    They try to patiently accumulate, act near hot spots.

    Yet, there is particular situation when smart money players start acting like a "crowd" (they bring big volumes and do it very urgently)

    It is called "Flight to safety" (or "flight to quality" in some sources)


    Flight to safety


    It can occur when something catastrophic and unexpected happens. For example, war or terrorist attack, large bancrupcy, financial crisis and so on.

    There are lots of examples when market reacts too rapidly and too emotionally.

    For example - housing bubble crash in 2008 (known as "World Financial Crisis"), Asian crisis, "Dot-com bubble" crash e t.c.

    If "flight to safety" is in play, all short term trading techniques (for example - pivot points, channels or trend lines, divergencies and others) may work against short-term trader because traditional market logics doesn't work in such circumstances.

    During 4th quarter of 2008 I was short-seller and I've seen with my own eyes that all short-term trading systems was broken. Market was simply breaking level after level and falling down without any rest.


    Look at this chart:

    Attachment 1092

    It is AUDUSD, one of probably most volatile currency pairs for that period.

    You may notice that selling pressure is enormous - market needs slightest trigger to start falling. In these circumstances traditional short-term logics will not work, especially if you work counter-trend.

    Now look what happened with the price of gold:

    Attachment 1093

    All major indices, currencies and commodities were in down-trend, and Gold market only showed strength.

    This is classical pattern of collective behavior called "Flight to safety"

    Investors extract money from assets considered as "risky" and put them in "safe" assets.

    Housing bubble of 2007-2008 was called "Global financial crisis", but from time to time, less global bubbles blow up, and money is being transfered from commodities or stocks to treasury bonds with guaranteed income, though it (income) is very small. But investors are driven by fear and simply want to save their money and purchase these assets not for yields.

    If you guess, that something similar happens on this market - be aware.

    Traditional market logics will not work here - market will make enourmous "squeezes" in the the destination of the trend. Though, you can just hold your position and enjoy profits.

    But be also aware that such type of market conditions is relatively rare one, so don't reinvent the wheel - use your approach until something big will happen.
    That's why sometimes it's useful to know what's going on in the world.

    Not allowed!
    Last edited by Value trader; 10-17-2013 at 09:36 PM.

  2. #11
    Trader
    Join Date
    Aug 2013
    Location
    Male
    Posts
    1,955
    Thumbs Up
    Received: 18
    Given: 16
    Analysis is very important for profitable trading, through market analysis we can get idea about further market movement. In general I follow the news and chart simultaneously. I observed that when any news regarding high rising of EUR/USD/Pound/Canadian Dollar are released then and there it affects the market. If we catch the market at that time and make any order promptly, then we can be gained.

    Not allowed!

  3. #12
    Registered user
    Join Date
    Sep 2013
    Posts
    2
    Thumbs Up
    Received: 0
    Given: 0
    wow.great article you shared. i like "Flight to safety" part most.

    Not allowed!

  4. #13
    Registered user
    Join Date
    Oct 2013
    Posts
    3
    Thumbs Up
    Received: 0
    Given: 0
    I agree with your interpretation of these. It is still about the rules of supply and demand, and the overall player in the market, how is it that the ones at the end of the maximum power, it is like that all the time, no matter what the financial markets are trading in the analysis. Sir, please you meant by the housing bubble?

    Not allowed!

  5. #14
    Trader
    Join Date
    Oct 2013
    Posts
    5
    Thumbs Up
    Received: 0
    Given: 0
    Quote Originally Posted by cozard007 View Post
    Thank you for the detailed article sir, I agree with all these that you have explained. It is still about the rules of demands and supplies, and this is how the overall players are doing in the market, the ones that have the highest power takes it at the end, it goes like that all the time in the financial market no matter the side of trading analysis they are. Please sir, what do you mean by housing bubble?
    always use the analysis if we want to determine the market fundamentals .. because all it is most likely reversed course, if we can read the news and already understand about the movement of the news then we must be prepared to deal with the market, fundamental, derived from a news, but all in beyond prediction

    Not allowed!

  6. #15
    Trader Nizar's Avatar
    Join Date
    Aug 2013
    Location
    Khartoum,Sudan
    Posts
    739
    Thumbs Up
    Received: 16
    Given: 23
    Quote Originally Posted by cisco_fx17 View Post
    always use the analysis if we want to determine the market fundamentals .. because all it is most likely reversed course, if we can read the news and already understand about the movement of the news then we must be prepared to deal with the market, fundamental, derived from a news, but all in beyond prediction
    we can start our journey to understand fundamental analysis by understanding the main fundamental indicators like unemployment rate and GDP and Retail Sales we should know the time of their release and the effect they do on the market and also the strength of that effect,this way we start first step to fundamental analysis.

    Not allowed!
    Bend your view to the charts, not the charts to your view

  7. #16
    Trader
    Join Date
    Oct 2013
    Posts
    160
    Thumbs Up
    Received: 3
    Given: 0
    I don't get it. What is the meaning of housing bubble?. Forex trading market impact massively by news. And if you know ho to use the best of funda then you can get good result from your trading. One thing sir that i don't think AUD/USD is the most volatile pair as i think GBP/USd is the hot favorite. Thanks..

    Not allowed!

  8. #17
    Trader
    Join Date
    Oct 2013
    Posts
    78
    Thumbs Up
    Received: 0
    Given: 1
    the detail of flight to safety about fundamental of forex trading explained very well. its really helpful for us. after reading this post, now i got a clear graphical idea about how it works and how i need to use it. i'm doing forex trading with only based on technical analysis, and i believe that if i use fundamental analysis in my strategy, i will be able to get more profits.

    Not allowed!

  9. #18
    Trader
    Join Date
    Mar 2013
    Posts
    1,504
    Thumbs Up
    Received: 8
    Given: 1
    Quote Originally Posted by Shadow View Post
    I don't get it. What is the meaning of housing bubble?. Forex trading market impact massively by news. And if you know ho to use the best of funda then you can get good result from your trading. One thing sir that i don't think AUD/USD is the most volatile pair as i think GBP/USd is the hot favorite. Thanks..
    Yes i agree with you that GBP/USD is much more volatile pair than AUD/USD pair because there are many news related to GBP and USD currency which makes this pair more volatile and more hot favorite for trading than AUD/USD..traders who are good in market fundamental analysis always prefer to do trading on those pair which are more effected by news to earn good and quick profit..

    Not allowed!

  10. #19
    Trader Nizar's Avatar
    Join Date
    Aug 2013
    Location
    Khartoum,Sudan
    Posts
    739
    Thumbs Up
    Received: 16
    Given: 23
    Quote Originally Posted by mark48 View Post
    Yes i agree with you that GBP/USD is much more volatile pair than AUD/USD pair because there are many news related to GBP and USD currency which makes this pair more volatile and more hot favorite for trading than AUD/USD..traders who are good in market fundamental analysis always prefer to do trading on those pair which are more effected by news to earn good and quick profit..
    the volatility of a certain pair is also affected by th difference in interest level between the tow currencies that constitute that pair,that is why before the recent cut in interest rates by global central banks the gbpjpy was the most volatile pair and carry traders heaven due to big interest rate difference between gbp and jpy.

    Not allowed!
    Bend your view to the charts, not the charts to your view

  11. #20
    Trader
    Join Date
    Oct 2013
    Posts
    9
    Thumbs Up
    Received: 0
    Given: 0
    Any factor that could be considered important to the understanding of a particular business. Fundamentals are usually considered outside the context of the market as a whole. Some examples of fundamentals include a company's growth, revenues, earnings, management, and capital structure. The use of fundamentals as an investment strategy is called fundamental analysis.

    Not allowed!

Page 2 of 92 FirstFirst 1234561252 ... LastLast

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •