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methodology. By ignoring these subsequent signals, you prevent yourself from being stopped out repeatedly. The trick here is that the fundamental picture will change a little differently each time. |
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I urge you to learn as much as you possibly can about all the inter- and intramarket relationships in every market you trade in. For example, if you are trading soybean oil, do you know how coconut oil might affect soybean oil prices? If not, perhaps you might want to read up on that interrelationship. Perhaps your trading methodology will not even consider fundamentals; that is fine. After all, your methodology represents your unique perspective on the market. Even if your methodology has no fundamental component, I urge you to become aware of the key fundamentals about the contracts you are trading in. If for no other reason, the additional knowledge will help you enjoy trading a little bit more. |
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In Appendix B you will find a list of Internet sites that you can visit to help increase your level of fundamental knowledge. As I look at a wide variety of markets, I enjoy visiting a variety of Web sites to get news. A trick that I have found is to read the Internet version of foreign newspapers. This helps me realize on a daily basis that even though the United States is a vital part of the overall global economy, there are other perspectives that carry a lot of validity. These foreign perspectives are quite naturally affected by the developments within their countries, and worldwide. Consequently the price movement of a market that I am trading in, or a related market, will be affected by international factors. How was this knowledge beneficial? Let me give you an example. In 1997 the Malaysian currency devalued, and this affected the value of the currencies of nearby countries. The devaluation dramatically increased the cost of Malaysian imports and lowered the cost of exports. Two commodities I was trading that were affected were crude oil and soybeans. |
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Without going into all the reasons why, it became very apparent to me that the price of crude would have to drop, and the price of soybean oil would also have to drop. Consequently I waited for these two commodities to give me a sell signal using my methodology. The ability to wait for the sell signal depends on how strong your virtues are. My success was that the fundamentals gave me a clear signal on decreasing demand with the supply not being affected, indicating lower prices. My primary technical methodology then gave me my exact entry point. |
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The more you learn about fundamentals, the more profitable you will become. Understanding the "big" picture will also give you the confidence to stay with a trending market longer. |
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