Fundamental Information Part 1
The central role played by US monetary policy, including Q.E. & Q.T., and the $ in global financial market correlations.
The implications of Jean Claude Trichet omitting the phrase “strong vigilance”, or Mario Draghi’s “whatever it takes”.
The significance of a potential uptick in the US unemployment rate in the Employment Situation report.
All of these are key fundamental issues that professional Traders must understand and whose evolution they must be able to track and interpret in the blink of an eye. However, the most capable fundamental analysts do not necessarily make the most capable traders. Much time is dedicated in a traders training programme to developing trainees’ ability to understand the fundamental backdrop to the global financial markets.
However, the vital question often overlooked by novice traders is “how do I translate this fundamental information into my trading?”
There is no money for being able to out-analyze either your peers or any other market participants. Rather, it is the ability to effectively translate such understanding into your trading, and thus your end of day/week/month P&L, that really counts. It takes both time and deliberate practice to develop the skills required to interpret fundamental information, and yet more time to be able to effectively translate this understanding into trade ideas.
However, the process is much quicker if individuals are acutely aware of the need to make this end-to-end link from the outset.
The clear rule of thumb is – unless you can take a fundamental piece of information and translate it into a specific trade idea or it directly supports/enhances your trading decisions, it is superfluous.
Traders have to interpret a huge amount of information on a daily basis. A key skill is being able to sift through this abundant information and hone in on that which is most important. As a novice trader, it is all too easy to get bogged down in excess information at the expense of effective trading and paralysis by analysis is a common outcome if this is left unchecked. Making consistent profits is the outcome goal and nothing should distract you/us from the relentless pursuit of this.