Ines’ Fundamental Technical Twister

Hi everyone! I’m Ines from Linz, Austria. I could tell you my story about how I got started in forex trading and how long it took me to build up a portfolio which is big enough to actually generate enough annual income so that I can call myself a professional forex trader. We all have a different approach, but most us do aspire to become a pro at trading. What does this mean? In my opinion it doesn’t mean that you trade forex portfolios for others. It sure is one definition, but to me I am a professional trader. The reason being is that this became my career and I was able to quit my job as a chemist. A professional trader is one who makes a living from trading and revenues generated are the prime source of income. That’s me, Ines, a former chemist who retired at the age of 48.

I will skip what inspired me to start trading over two decades ago, how I entered and struggled as every other new trader. The only message for new traders I want to reiterate is to take your time and learn, be patient and never approach trading with a get rich quick mentality. So, let me talk about what inspired me to write this post. I have been around forex trading now for over two decades and as I mentioned earlier, I trade for a living. I only trade my own money and operate a second account for friends and family after they convinced me to accept their capital. As you can imagine, over the last 20+ years I have read just about everything there is to read when it comes to forex and trading.

As my headline suggests, I want to touch on both schools of thought when it comes to analyzing currency pairs. You have probably read and heard countless articles and opinions on which one is better. Both ideologies have a tremendous base and make very valid points. Before I give you my opinion, I believe that the right answer depends on the individual trader. One of my earliest lessons I was taught by my mentor was that when it comes to trading, we don’t trade against banks, brokers and big firms. We trade against ourselves, we trade our personality and we need find a trading strategy which reflects who we are in order to be successful.

Please keep this in mind as you read my thoughts on this topic and as I share my approach to analysis which has helped me slowly transition out of my previous career as a chemist and become a professional forex trader. Each approach has its own strengths and weaknesses and understanding them may help you better to decide which approach you would like to follow. Fundamental analysis is based on economic data as well as geopolitical events. They are very unpredictable and some claim it is nothing more than taking a guess when it comes to economic data while geopolitical events will often surprise traders and may result in violent price action swings.

While economic data is well communicated in countless economic calendars so that the release won’t surprise traders, the data itself cannot be accurately predicted. Economists place guesses and many traders follow those. That’s why you may often witness wild swings right after the release. This has caused many forex traders to be stopped out of trades for a loss. It doesn’t matter of you trade based on economic data or not, you must follow the economic calendars and be aware of what will be released when in order to be fully prepared for it. It requires work and preparation, but trust me it is more than worth the effort. This is especially true if you want to become a professional trader as there is no room for laziness.

From my own experience, fundamental analysis works best on longer time frames. Therefore, if you decide to trade based on it I recommend that D1 and the W1 charts as fundamental trading set-ups work best on those. Fundamental analysis and short time-frames don’t work well together and should be avoided. You can certainly try, but you don’t have to always reinvent the wheel in order to be successful. Creating tour own trading strategy is one thing and I can only recommend that no matter what you do, twist it to your own liking. Never just take a trading strategy which works for one trader as it may not work for you.

Technical analysis can work on all time-frames, the longer the period the more accurate the signal. The drawback to technical analysis is that it requires time to confirm a trading signal at which point over half the move in price action may have already unfolded. Many compare technical analysts to traders sitting on the fence and never being able to enter a trade as by the time the confirmation is present, the move has been exhausted. I disagree with this notion as you can avoid this scenario with experience and the proper approach. Initially you may take on a bit more risk, but over time you actually decrease your overall trading risk by developing you own strategy and spotting trades earlier in the cycle.

I like to focus on a fundamental analysis in order to get the direction of a trade. Each day I like to trade those currency pairs which have the least amount of economic data scheduled for release. This helps me avoid price action swings which are often reversed. Keep in mind that currency pairs are connected and there may still be a ripple effect. After I settled which currency pairs to trade, I apply a technical analysis in order to find the best entry and exit levels for my trade. In my opinion, you need to combine fundamental as well as technical analysis if you want to become a truly successful forex trader. Regardless of which type of trader you are, join PaxForex today and start your own path to become the best trader you can be!