Trading with Fundamental Analysis

[MrGecko]

Well I hadn't heard it before, and Junker was just talking about it. Missed the boat... I dunno, my strategy is "sell eur/usd if something bad comes out of europe", and who is to say that all the bad news is done with? It's just the end of silly season, no reason why we shouldn't continue from where we left off.

Also, I reckon the next "flavor of the month" could be the new Basel III stuff, which could hurt banks, and hopefully pull eur/usd lower with it.

 

[scose-no-doubt]

You know what you're right. I keep thinking like a chartist lol.

 

[Martinghoul]

Some people must trade this way, but is the information barrier to entry too high for a retailer?

Sorry, I misunderstood again...

I don't trade this way and can't imagine anyone trading this way. I think the information barrier is there for everyone in this approach, even for the majority of the sell-side institutions. It is what many flow traders at banks do, however (which is partly why so many of them fail miserably in a real prop setting).

 

[MrGecko]

Eur 1M volatility at low since the greek debacle in June... from Bloomberg

 

[Shakone]

I don't see why your approach can't work. Isn't it just about putting some structure onto something which is random and often hard to understand? If your judgement of the fundamentals gives you a better insight into what is likely to happen, then great.

I don't think I personally would want to go down that route though. Aside from what was mentioned about stops (and so targets), I wouldn't have confidence in myself being able to repeat it. Will you interpret similar fundamental data in the same way next time, next year or whenever. If not then is your success repeatable? A bit like if you make a judgment call on where support and resistance are. Next time will you put them in the same place? A bit worrying to go down the route.

 

[MrGecko]

For stops, in this instance I have just picked a volatility based measure from thin air. That is a common approach in trend-following models I think, so no reason why I shouldn't use it here. Same for position sising.

As for interpreting the fundamental data, in this instance it was just a case of reading the news. In my experience there tends to be a current theme that is playing out somewhere most of the time, it is just a case of keeping up with the news as to find out what it is and how the markets are reacting. Right now I have interpreted the theme as "peripheral Euro weakness ahead", and the reaction to be a sell-off in the Euro. I took the trade when I saw (a very out of date, my bad) catalyst for that theme to continue.

That is the general idea anyway, it's a sort of trend following strategy but uses newsflow rather than moving averages as entry / exit triggers. At least there is no reason why it is inferior to said moving average strategy.

 

[barjon]

MrG

Perhaps "fundamentals" is rather overblowing it. What you're doing basically is trading the news which can't be a bad approach - s'why the trading houses pay out for their news feeds.

jon

 

[MrGecko]

Yes, in hindsight "fundamental" wasn't the best choice of words.

As for trading the news, I don't think this is in the same league. In my mind trading the news is literally a case of fastest finger first, trading against expectations. Here, I am trying to trade with the "sentiment" and use events that corroborate the sentiment to get in.

For example, bunds and 10yrs have also rallied on the back of this Euro stuff (that's the sentiment), and then there was this 3yr auction which apparently had the lowest yield ever with a bid to cover of 3.21. This is a good example of an event that corroborates the sentiment.

 

[Shakone]

Trading on sentiment and using some technical analysis for the stop. Sounds good

 

[MrGecko]

lets try it: short EUR 1.2707 on the back of intra-EU tensions re: slovakia

stop @ 3 * ATR(30) on 4hr chart

closed this, looks as though I'm a little early (-35).

 

[Borgnino]

Hi,
The analysis of a business' starts with financial statement analysis that includes ratios. It looks at dividends paid, operating cash flow, new equity issues and capital financing.