 Hi, my name's Liam Rowe currency trader and trading coach at trading 180.com and in this video I'm going to be discussing a very Touchy top topic to some people which is fundamental analysis and fundamental analysis Is an approach that I use as well as technicals, but I received this comment from a watcher one of my videos and they Felt so strongly about her fundamental analysis They decided to comment and they said using mainstream media's news for your fundamental analysis is the worstest service you can do to yourself Not only has that information been priced in it's also stale as F That's why you should only do technical analysis and there's a lot of myths surrounding again fundamental analysis mainstream media and Even if You know the news has been priced in and the data has been priced in already Doesn't mean that you can't trade it or it's untradable. So I'm going to pretty much go over You know my thoughts are really kind of dispel a lot of these these wrong narratives of surrounding You know the media what's been priced in what hasn't been priced in the fact that you can get ahead of the news And a lot of times you just have to be a bit patient and I'll give some examples and a recent example that happened today with oil So Looking at understanding priced in what is priced in everything that is known fundamentally about an asset is priced in so You know what that means is that you know if you've got an asset be it you know Commodity could be exchange rate could be bonds. It could be Stock you know it could be a car or a property or a home, right? Everything that is known about that Particular asset, right by people will be priced in yeah So if you're talking about for example, it could be a Ferrari, right? Everything that is known about that Ferrari is priced in then it's given a price and a value and people are gonna accept right that price net value to varying degrees so You know depending it could be a hundred thousand it could be a hundred and fifty thousand it could be a hundred and twenty thousand But there will be a typical range I guess as to what That you know buyers and sellers are willing to do business for that said asset now institutions and when we trade institutions have this have the same approach right and they have different valuations which are known as fair value auctions and They have different valuations When it comes to pricing in a said asset So let's say for example We're talking about Forex because I'm a Forex trader and so the euro dollar currently is Priced in somewhere around the one oh, you know one oh nine. It's right now Everything that is known about the euro and the dollar Right the current price will be one oh nine But what You know banks will typically do is they will say some banks will say well one oh nine would be you know a fair Value price and some banks might actually say, you know the one Tenth right might be in fact fair value price Some banks might say 108 yeah might be the fair value price But typically it will be in what is known as I guess a range right or an auction What buyers and sellers of said euro dollar or what they think you know the value of that exchange rate should be Price then doesn't mean it's going to be one price. Typically. It's they're usually a Range of prices. Yeah, so even though let's say, you know data comes out You know you go into Forex factory and you're looking at for example something like I don't know GDP data That comes out and then it comes out, you know as as expected as forecasted and If price goes let's say it's going up like this Yeah, it's going higher and higher and then all of a sudden, you know, it comes out as expected and then the price You know drops a bit. Yeah, it goes down to maybe, you know 108 50s the 108 Praders will then say oh well, you know Biden you sold sell the rumor But what they don't realize is that in fact that news has been priced in between Potentially the 108 and in fact the one-tenths and then you know a week or two later You might see price do something like this and go higher and then you know stay around this if there is no new news or Nothing is expected to change in the future because the market is always forward-thinking in terms of what is future value and so whereas Retail tend to focus on what is happening today and what is happening, you know You know what has just happened and even you know trying to think about what might happen tomorrow Financial institutions are really focused on what's coming, you know, not only today But they're thinking always thinking about what future value is and to kind of illustrate this point There's an example on on Citibank, right? so this is one of their latest reports from last week probably going to be updated at some point this week and If you go down to the technical levels, yeah Supply I'm sorry support to support one resistance one resistance to and what they're really saying there is for example for focus on I guess the euro dollar right is that they're saying that between support to and support one which is 105 to 107s, yeah are Where the auction may potentially start? Yeah, where the where the bargain prices are the bottom end of the auction and resistance one resistance two are where the top end of the auction is Currently right or where they think those are the areas that are probably going to be expensive because again if we're talking about Auctions and let me just you know go down a little bit. You can kind of use my drawing tool Yeah, is what they're saying is is that price is either going to be around the 105s let's say or one of sevens and one of fives. Yeah, this is a price chart Yeah, the price chart or it's going to be between the 109s and the 110s Yeah, so they're saying that price should want to auction somewhere between these areas Of course, nobody knows not even the banks themselves because there are many banks Right that doing different valuations and putting different amounts of money, right and capital to the market and so This is their interpretation of what value is and the only way that value Then tends to go either to the upside or to the downside and break out of that fair value auction Or what is known as a range is if something different occurs, right as if you know New information is priced into or not priced into the market and the market then in the banks and financial institutions have to then price that into You know the current valuation, right and so You can consider priced in yeah as a fair value auction or a Ranging market state. Yeah, what is known by many retail traders as a ranging market state And so if you understand that you have a you know, it's been priced in but There are going to be different valuations in terms of you know, maybe around a hundred to 200 pit, you know valuation All right, sometimes a bit more Then what do you do you just apply? You know Trading strategies, you know That are more Fair value auction or range focused rather than trying to apply a trend trading strategy to a Priced in or ranging market state, right? And that's one another problem that retail traders Do is that they apply the wrong strategies to the wrong market state and they always will because if you don't know This information and you're thinking that you're expect always expecting the market to trend at some point Not realizing actually in fact fundamentals will tell you whether things are being priced in or whether they're not been priced in or Unlikely to be priced in then you're always going to be on the wrong side, right more often than not And ultimately when things are not priced in right because there are times and moments where A new information comes out the market has to get ahead of the curve And start to price that in now, you know, that's where you start to see Trend right so you can either see a trend to the downside, right? Well, these are to see breakouts Yeah, start to happen and then what ends up happening is in fact the market You can go on a price chart and see this is that the market will then value Let's start to value The asset a Lot lower, right? Something like that and that that might be let's say between, you know, 105s and maybe 101s Yeah, whereas before this was like maybe 105s to maybe 109s or 110s Then that might be 105s to 101s with the new information, right? And they'll price it in and then that will be the auction where again Financial institutions some might think that the 101s might be a bargain area Some I think the 102s some I think actually the 105 is a decent etc. So that is really what Christ in really means And any time that mark them, you know news is not priced in when you see a trend and a massive trend Happen because normally that's gonna be hindsight bias, right? traders who typically just trade Technical analysis won't see the trend until it's actually happened, right? They'll then they'll start to look back and go. Oh, yeah, that was a trend right after potential auction Yeah, when markets went sideways not realizing that in fact fundamentally, maybe you should have been buying here Anticipating the change and then when prices go to the upsides they're linked to the party But fundamentally you knew you should have been buying, you know down here And around these areas here as these represented bargain prices if you understood what was You know what could potentially happen with you know, for example, you know trade ideas that you develop and understanding like I said the fundamental side of things now You know Looking at friends is when you're looking at the market actually looking to price in the new valuation. Yeah of what they think The asset is worth until it finds evaluation and then you get again That is being the market has already priced in What is known about the asset, right and let's look at actually an oil example so today we had oil come out and Oil $100 oil to tighter markets. Here's what analysts see after OPEC shock cut so Yesterday over the weekend. There was a shock OPEC cut who the supply of oil and Goldman raises its rent price forecast by five dollars to ninety five dollars a barrel And OPEC not afraid of major USL oil Supply response Bank of America and so ultimately There was a surprise Shock right in the fact that OPEC have now decided to to cut oil supply I would OPEC members and so Goldman Sachs they that OPEC has very significantly or very significant pricing power relative to the past analysts including Dan's Derevin and Callum Bruce said today's price cut is consistent with their new doctrine to act preemptively Because they can without significant losses In market share and this combined with the extension of Russian production cuts that the Wall Street giant to raise its Brent oil forecast to ninety five dollars a barrel For December this year from ninety dollars earlier and a hundred for December twenty twenty four From ninety five right and so fundamentally you understand or you should understand that the oil is driven by supply and demand Right the more demand you have Is the higher prices go and more supply you have the lower prices go and so this surprise cut Willing reduce supply right and if demands stays the same then obviously prices should go higher Now this is today's news Yeah, this was today's news third of April I'm recording from the third of April and so this is also from mainstream media now Does this mean that because this news has come out that that's it? It's over now. Do you know I mean it's been priced in You know, this is you're doing yourself a disservice by reading You know this type of article right it's already too late and the answer I would say is absolutely not What you have to do now is understanding What the mainstream media has reported and what in fact the analysts are reporting right so you can you go further down It's not just Goldman Sachs given their opinion. By the way, there's Bank of America pretty much saying the same thing You know city group RBC capital markets LLC A and Z You've got Commonwealth Bank of Australia Scandinaviska Not gonna butcher that but that's another it sounds like a Scandinavian Bank Vanda insights as well, right? They're all pretty much saying that You know prices should pretty much, you know go higher for oil and so Fundamentally things have changed now What do you do? Right? Do you just give up and say what it's been priced in well? In fact, it hasn't been priced in because ultimately we've just read that potentially you could see Prices go a lot higher right so maybe around the 95s and some are even Speculating that price it could go to a hundred right so a hundred would be you know somewhere around here the hummus All right, and 95s could be somewhere around here right now. We're at 84s. So What do you do as a as a trader who thinks that the news has already been priced in yeah You're not gonna do anything right you're gonna say always too late pretty much even gonna read the news Right you're gonna be totally blind to the fact But if you're a fundamental trader and you understand that now is an opportunity to try to get on board While the banks are all pricing in because nobody hasn't been priced in yet is a surprise from OPEC So oil hasn't been priced in yet, and they think that should be priced in you know To the 95s to now that the 100s in the in the future. Yeah by December. What are you gonna do? Best thing to do is to wait for pullbacks at some point because there will be pullbacks right with the prices go higher Right and then come lower, and then every time price is making new high Pullbacks, you know look like bargain prices right now how it's gonna get there Who knows you can come all the way down here, but what you do know is that or you should always remember that Price can come down. This just means that you're buying for a cheaper price. Yeah, that's all this is and Again, you would never have known this if you didn't a watch mainstream media and be I guess watch my video And understand really how the markets typically work Yeah, so it's I would say you really have to Understand how the market does work and how it you know prices in and value isn't Present every day right it's these opportunities don't necessarily come around every single day as much as we would like them to they don't But when the opportunity arises and these things do happen then we have to be ready for them And it's a no-brainer now to look for you know pullbacks in oil, right? And so really going back to the the statement You know about fundamental analysis Doing yourself the worstest service you can And the fact that the information is priced in and it's being stale I don't know. I don't know if this is if this would be considered stale news I guess when it reaches up 95, you know $100 a barrel if it does because there's no guarantee of course anything can happen in the future But if it does then yes, then I'll probably say then that would be still you'd be late to the party, right? But while prices are at the 85 or 84 level Yeah, any pullbacks would be considered buying opportunities and you're riding the wave with the financial institutions Who are now attempting to price in the new information? Yeah into Into oil right into the cost of oil, you know per barrel So yeah, that's that's pretty much it and that's all I really wanted to say Hopefully now you understand how this works or at least have a basic understanding as to how this works and why you really should Apply fundamental analysis read the news, of course, not all news is good news and not all news is You know worth reading but you have to kind of filter through the nonsense in order to make some sense And so not every single article is going to be Useful, but there are some gems in there out there in the on the internet and And once you get that and once you get those regular And subscribe to those regular Publications and you know watch those analysts And what they're forecasting and what's happening then you can start to get an idea as to how to you know trade alongside and along with the banks rather than Just accepting the fate that you know you can never You know be ahead of the curve with them because you can and we are a lot of times in trading 180 So yeah, that's pretty much what I want to say. Hope you enjoyed the video all the best and until the next one