I commonly get told over and over by other traders, due to this fundamental and due to that fundamental the market will do this in the future. I can completely agree with them that this is an easy trap to fall into, after all banks promote fundamentals work, brokers are constantly saying what do the fundies say..?
In a way trying to work out what is the fundamental sentiment and trying to weed your way through the market on a confused sense of control sounds like an edge but let me clear the air a bit..
“Fundamentals are useless..!”
There you go, you made me say it, now if you love fundamentals you are probably thinking of me as what is he on about.. Well this is how your should see fundamentals yet let me tell you you do not even need to watch them at all, the chart is telling the story every time..
Let’s take the recent move on EURUSD as an example below in a bullish channel now.. An extremely strong NFP result was released and all traders that are fundamental based would of been selling it saying it is going down to the moon.. Were they right? Well it did drop, but did it come back based completely because of the bullish channel..?
( Click Image above for larger view )
In a way it was NFP vs technical’s once again and which won? Technical’s of course, and it works time and time again.. Only under certain circumstances do news and technical’s line up..
What i mean by lining up is if say a pair is in a bearish channel and bearish news comes then of course it will help it on its way.. However if say the same pair is in a bullish channel will it have the same effect.. Most of the time heck no and i am going to reveal the secret as to why right now.. Most of the time negative news in bullish scenario technically will only push price back to create opportunity to buy once again.. It is as simple as that my friend.
Now let me tell you the big secret that no one wants to share..? Okay are you ready, well markets are not moved by us small retail traders they are moved by banks and institutions, you would agree there yeah.. And so what helps us read what they are doing..? ( News has little effect to there plans.. )
Well that answer my friend is the charts and the candles..
Below is another example of GBPUSD in a bullish channel.. Do you think it is smart to sell this pair at the arrow based on what the chart is saying would you sell near the arrow..? Now with EURUSD would you think after good NFP results and major retrace would you think it is smart to sell EURUSD at the arrow or would it be smarter to wait and see if the bullish channel holds.. If you answered respect the channel unless it really breaks then welcome you have just improved overall as a more excellent trader.
( Click above for larger view )
The Golden rule is unless a trend line or channel breaks completely ( new candle close below) there is no trend change and that the channel is still respected.. A perfect example can be seen on EURUSD screenshot above..
Now, take a moment and look at the reward you would of gotten on any of these channel moves.. Also look at the small risk placing stop around 50 pips below or above channel.. If you are wondering, I love channels, they are one of the best technical patterns I love to trade, the reward in them is always exceptional and they tend to be obeyed and respected at least the minimum 7 times going over history..
Now, if you are a fundamental trader and think I am wrong then comment your thoughts below…