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The Basics of Fundamental News
I know sometimes this newsletter is not the easiest read. As a matter of fact, I think if I am an absolute beginner, I would probably just unsubscribe...
Well, don't do that just yet! That's why I am writing this email to you. I want to give you a quick lesson on news trading so that you can follow my newsletter. If you are a seasoned trader, then probably you should delete this email right now... But if you are new to this fundamental news trading business, then I urge to read on.
First of all, let's define some terms that I use in this newsletter.
1. Forecasted (Consensus or Expected)
Figure: This is usually derived from a survey done by financial news
organizations such as Bloomberg, Reuters, etc... Usually they get a
number of economists, anywhere from 20 to 240, and ask them what number
they think it will be. After getting all of the numbers, the highest and
2. Deviation (or Surprise Factor): is the difference between the actual release number and the forecasted number. Let's say that CPI is expected to be 3.0% and the actual number came out as 3.3%; the deviation is then 0.3%.
3. Actual Figure: This is the actual release figure from the official source of the information.
4. Revision: This is the revised change done for previous release figure, usually the month before. It could sometime impact the market greatly if the revision is huge. Usually if we have a good deviation with a good revision number, the market will react even more.
Now let's define what is Fundamental Trading:
Every major news release has a forecasted or consensus figure determined
by economists beforehand. If the actual release figure is different from
the consensus or forecasted (or expected) figure, the market is surprised
and will react to the release immediately. The bigger the surprise, or
deviation, will produce bigger reaction. Based on historical data, we can
predict that a particular deviation will
See, it is really not that difficult. My newsletter will only include these particular releases with a good track records. Sometimes a high impact news will be excluded because of the lack of track records. Fundamental Trading is gaining an edge over market volatility, not gambling.
There are actually several ways to trade news, the most
common one is to trade the news as it is being released. This is a little
difficult nowadays since brokers are widening spread, freezing their
platforms, or use slippage to discourage traders from taking
advantage of the news. But you can always learn to trade the after
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