Mastering Fundamental Reports

There is a constant ongoing debate on which type of trading is better, technical analysis or fundamental analysis. When it comes to trading commodities and forex, if you don’t stay on top of fundamental reports, you are bound to be blindsided in your trading. While you cannot trade directly based on fundamental information, by knowing when these announcements occur, you give yourself the upper hand in discovering what your chief trading opponents, the commercials, are worried about or planning for.

Depending on the type of trader you are-active, swing, or position-you approach fundamental reports based on your own needs and goals. You will utilize fundamental information either to protect the position you are in, to start a new trade, or to add on to your positions. Having a thorough knowledge of the when and what the reports are will make your trading more robust. The ability to know what the commercials are looking for and what they are expecting from key data makes you an insider as well.

However, there is a lot of information to filter through. It’s impossible to know how or if the market will react at all to the news. Often, the news will be bullish and the market will tank because the information has already been incorporated into the price activity of the markets. Use fundamental reports only as guideposts of the state of the markets, not as gospel.

Some of the most prolific fundamental information sources are the various economic reports that come out every month. They deal with interest rates, labor statistics, import/export numbers, and so on. The trick to incorporating this fundamental information into your trading is by picking and choosing the reports that will have the greatest impact on volatility, whether you are adding to your position or establishing a new position. The following economic reports do just that.

Labor Department-Consumer Price Index (CPI): 10th business day of the month

Commerce Department-Durable Goods Orders: 10th business day of the month

Labor Department-Employment Figures: 1st Friday of the month

Commerce Department-Gross Domestic Product (GDP): 20th business day of the month

Commerce Department-Housing Starts: 15th business day of the month

Federal Reserve-Industrial Production: 15th business day of the month

Commerce Department-U.S. International Trade: 3rd week of the month

National Association of Purchasing Management-Composite Index of New Orders: 10th business day of the month (inventories, employment, production, supplier deliveries)

Commerce Department-Retail Sales: -Mid-month

Labor Department-Unemployment Insurance Claims: Every Thursday

Major USDA Agricultural Reports:

World Agricultural Supply and Demand: Monthly

Grain Stocks: Quarterly

Prospective Plantings: End of March

Crop Production: Monthly

Crop Progress: Weekly

Cattle on Feed: Monthly

Grain Transportation: Weekly

USDA National Agricultural Service: Monthly

Tip for Active Traders

If you like to be in and out of the market in the same day, the best way to take advantage of fundamental reports is one to two hours before and one to two hours after. While much of the pricing may already be built into the trade, you have the opportunity to trade a lot of the momentum that small and large speculators bring to bear on the markets. Combine this activity with key candlesticks, and you will come out ahead. These are prime times for e-mini traders and forex traders.

Tip for Swing Traders

The typical swing trader is looking to buy and sell tops and bottoms. By paying attention to key reports and open interest, you will be alerted to whether or not a pullback is on the horizon or the market is continuing with its momentum. Ride out the momentum until it reaches your risk management points.

Position Traders

Fundamental reports will either validate or invalidate your long-term position if the market breaks that all-important 50-day moving average. If the 50-day moving average isn’t violated, you may want to add to your position; if it is violated, take stock of the market and don’t hesitate to peel off the trade if it looks unfavorable.

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