Forex Walkthrough


Level 6 Trading - Fundamental Speed Strategy

Fundamental Speed: The What and the How
Fundamental speed is the process of keeping track of key economic indicators that directly impact the currencies you trade, reacting to the release, and entering and exiting the position in a systematic way. Here is step by step overview on how the strategy works:

1. Focus only on high-impact economic releases.
Every day numerous economic reports are published globally but only a handful are really worth focusing and trading on. Large movements in currencies tend to occur when an economic release is tied directly to their rate of transfer in relation to another country's currency (One of the more important influences on the forex market are changes in interest rates, to learn more see Interest Rates Matter For Forex Traders)

Here are a couple of releases you should keep track of:

    Most economic calendars available online, such as Bloomberg's economic calendar, specifically highlight the high impact economic releases. For example, their economic calendar marks market moving events with a red star. This can be a handy tool when deciding which releases to focus on. (For more on trading news events, refer to Trading on News Releases)

    2. Set a time limit to move in and out of the market.
    Generally, after an economic release, a reliable price movement occurs for one to two minutes. Depending on whether the release met, fell below, or exceeded expectations you will see that the price typically reacts in the expected direction - but many times it moves in what seems to be a random direction after the first minute or two.

    This is not so much a random movement as it is a government trying to stabilize its currency or a bank pushing money through to get the best transfer rate - things that are out of your control. If the release points and moves in the direction of the daily moving average, you may feel comfortable holding your position for up to five minutes. However, look at this on a trade-by-trade basis.

    3. Do nothing in a neutral situation.
    If the predicted or forecasted figure matched the actual figure, don't jump in to a trade just for the sake of trading. Trading this strategy only gives you a few trade options on any given day (less if you trade only one or two currency pairs) and there is a temptation to risk money in a neutral situation. It is important to trade according to a system rather than emotions. (Trying to eliminate emotions from a trade can be a difficult task, learn how you can overcome this in our article Master Your Trading Mindtraps)

    More Probable, More Profits
    As a forex trader it is important to making trades that have a high probability of success. Over time, by making trades that have a good chance of success typically you will have a higher overall return. Sticking to a system allows you to monitor your trades to determine which trades are not profitable and which are profitable. Two other key benefits of a fundamental speed strategy are:

    1) Less reliance on charts and technical analysis.
    As a beginner forex trader, technical trading will seem complex and difficult to read correctly. On the other hand, reading fundamentals (via economic reports) and reacting correctly can be done with more consistency and with more predictable results. As you become more accustomed to trading, you can blend fundamental speed and technical analysis to enhance your trading opportunities.

    2) Ability to develop a systematic schedule.
    For numerous traders, the hardest part of trading is deciding when they should trade. The timing of the economic reports allows traders to create a schedule and know exactly when they are going to trade. (Learn more about creating your own trading schedule by reading How To Set A Forex Trading Schedule)

    Trading using a fundamental speed strategy can feel more intuitive for some traders as it relies on economic releases. But this is just one strategy out of many that you should consider in your arsenal as a forex trader. In the next section, we'll talk about the carry trade which is another strategy that is popular among traders.

    Carry Trade
    Related Articles
    1. Investing

      The ABCs of Bond ETF Distributions

      How do bond exchange traded fund (ETF) distributions work? It’s a question I get a lot. First, let’s explain what we mean by distributions.
    2. Mutual Funds & ETFs

      Passively Managed Vs. Actively Managed Mutual Funds: Which is Better?

      Learn about the differences between actively and passively managed mutual funds, and for which types of investors each management style is best suited.
    3. Investing Basics

      3 Alternative Investments the Ultra-Rich Usually Own

      Learn about the ultra rich and what normally comprises their net worth; understand the top three alternative investments usually owned by the ultra rich.
    4. Stock Analysis

      The 5 Best Dividend Stocks in the Healthcare Sector

      Learn about the top five dividend stocks of companies operating in the health care sector that generate substantial cash flows to afford high payouts.
    5. Investing

      Baby Boomer Philanthropy Shifts Wealth Adviser Focus

      Wealth advisers who integrate philanthropy and finance planning can stand out with baby boomer clients.
    6. Chart Advisor

      These Oil & Gas Stocks Have Reversed

      It's been a long downtrend for oil stock owners, but there's hope. These four oil and gas stocks have reversed and may keep trending to the upside.
    7. Chart Advisor

      Bumpy Roads Ahead In Transportation

      Investors are keeping an eye on the transportation industry. We'll take a look at the trend direction and how to trade it.
    8. Mutual Funds & ETFs

      Mutual Funds Millennials Should Avoid

      Find out what kinds of mutual funds are unsuitable for millennial investors, especially when included in millennial retirement accounts.
    9. Stock Analysis

      The Biggest Risks of Investing in Netflix Stock

      Examine the current state of Netflix Inc., and learn about three of the major fundamental risks that the company is currently facing.
    10. Bonds & Fixed Income

      High Yield Bond Investing 101

      Taking on high-yield bond investments requires a thorough investigation. Here are looking the fundamentals.
    1. Qualitative Analysis

      Securities analysis that uses subjective judgment based on nonquantifiable ...
    2. Capitalization Rate

      The rate of return on a real estate investment property based ...
    3. Profit and Loss Statement (P&L)

      A financial statement that summarizes the revenues, costs and ...
    4. Liquidity

      The degree to which an asset or security can be quickly bought ...
    5. Derivative

      A security with a price that is dependent upon or derived from ...
    6. Real Estate Investment Trust - ...

      A REIT is a type of security that invests in real estate through ...
    1. Can mutual funds only hold stocks?

      There are some types of mutual funds, called stock funds or equity funds, which hold only stocks. However, there are a number ... Read Full Answer >>
    2. How do I read and analyze an income statement?

      The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>
    3. Do mutual funds pay interest?

      Some mutual funds pay interest, though it depends on the types of assets held in the funds' portfolios. Specifically, bond ... Read Full Answer >>
    4. Why have mutual funds become so popular?

      Mutual funds have become an incredibly popular option for a wide variety of investors. This is primarily due to the automatic ... Read Full Answer >>
    5. Do mutual funds pay dividends?

      Depending on the specific assets in its portfolio, a mutual fund may generate income for shareholders in the form of capital ... Read Full Answer >>
    6. Can working capital be too high?

      A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>

    You May Also Like

    Hot Definitions
    1. Section 1231 Property

      A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
    2. Term Deposit

      A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
    3. Zero-Sum Game

      A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
    4. Capitalization Rate

      The rate of return on a real estate investment property based on the income that the property is expected to generate.
    5. Gross Profit

      A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
    6. Revenue

      The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
    Trading Center
    You are using adblocking software

    Want access to all of Investopedia? Add us to your “whitelist”
    so you'll never miss a feature!