Forex Fundamental Analysis

We have covered everything related to technical analysis in detail, and now you’re ready to get your hands dirty in the world of fundamental analysis.

You should remind yourself that learning both sides of the analysis spectrum—technical and fundamental—is important to reaching a real understanding of how to make money trading forex. As we said before we started on the technical analysis section, even if you use only one type of analysis type, other traders will use another.

We should know what other traders are saying when they give their guidance on the foreign exchange market, even if we don’t agree.

If meeting in the middle isn’t your cup of tea, let us leave you with an additional thought: one of the world’s best forex traders made billions with a combination of technical and fundamental analysis.

Insert George Soros. His fund, the Quantum Fund, posted annualized returns of 37% each year on billions of dollars from investors. That kind of performance should be enough to get you interested.

Soros made three noteworthy trades:

1. Thailand Baht – After conducting his own fundamental analysis, Soros knew that the Thailand Baht was overpriced in the forex market. He made a big wager, knowing that the central bank which had kept the Baht articifically high couldn’t do so forever. He was right. The Baht plunged, and Soros cleaned up.
2. Britain’s Pound – Soros famously fired a $10 billion shot against the GBP, shorting it in a trade that would make him and his fund more than $1 billion in a single day. This fundamentally backed position was based on the premise that the Pound would fall after Britain left a European currency system all the way back in the 1970s. He was right, and he cleaned up!
3. Gold – Gold has a tendency to earn the label of a currency (we’ll get to this later; it’s very important to understanding economic history). In 2010, Soros sensed that the momentum for gold wouldn’t stop. He called gold, “the world’s largest bubble” and then put billions of dollars on the line. Purely technical, Soros knew that the uptrend in gold was unlikely to slow thanks to a surging amount of investor interest, and he later closed the trade to make even more money.

If George Soros can make use of both fundamental and technical analysis, then you can too! In the following sections you will become an expert on fundamental analysis, and how to find good trades with your analytical skills.