 Hi, my name is Liam Rowe, currency trader and trading coach at Trading180.com and in this video I'm going to be covering what I believe to be some of the major pros and cons of applying fundamental and risk sentiment analysis to your technical analysis and one thing I definitely want to make absolutely clear, this is not a polarizing debate as in fundamentals versus technicals right because at the end of the day both have their strengths and weaknesses and you know the best thing to do really in my opinion is to combine both the best of both so I definitely don't want to you know make out like this is you know fundamentals are the be all and end all they work hand in hand here and so I guess if you are a technical trader who is thinking about you know applying fundamentals to your technical trading and I'm assuming that technicals obviously isn't working for you otherwise you really wouldn't be watching this video right if the technicals were you know were working for you so this you realize that there's actually something more than just technical analysis maybe it's something else that you're missing in your trading and whether you know learning the fundamentals can help you with that and it's helped many traders in Trading180 discord group the my mentoring group and you can watch the some of the interviews that I've done there's a link in the in the description box below or there's a maybe a bit of a pop-out that might come up in the top right hand side of the screen anyways let's get into the pros and some of the cons of applying fundamental and this sentiment analysis to your technical analysis trading and whether you really want to write so one of the pros is that you will trade in the same direction as financial institutions not against them in the medium to long term right and what I mean by that is in the short term the market is generally looking for liquidity right so there is a business model and the business model is for the financial institutions big money to be able to transact and for market makers to provide the liquidity at certain prices for for those financial institutions to do transactions right now in the short term the market is very illiquid which means that you will have it can it can seem a bit you know random right as far as you know prices going higher prices going lower but generally over the medium to long term the fundamentals and risk sentiment analysis will always work itself out right and if you don't understand about what we mean about fundamental analysis in forex you know price is generally driven over the medium to long term by certain principles like monetary policy central bank monetary policy which is hiking holding and cutting interest rates because hiking holding cutting interest rates should have the effect of appreciating or depreciating devaluing a currency and it's necessary it doesn't mean that the you know appreciating is good and depreciating is bad in in order to run an economy successfully there are times where you will need a devalued currency and there are times where you will need in a more expensive currency right and the currency to appreciate it's not good or bad so the central banks are generally in the medium to long term influencing the currency through interest rate hikes so and that generally plays itself out over the medium to long term right in the short term as the financial institutions are accumulating the you know you can be long on a currency pair yet price can go down right and it can go down maybe a couple you know hundred pips that doesn't mean that you were wrong about the trade it just means that the the financial institutions are buying for hundreds of pips cheaper and you know if they expected to be maybe a thousand pips higher in the medium to long term right it's just a pullback so you'll always trade in the same directions as the financial institutions not against them over the medium to long term and also you'll understand that value is not always affected in price yeah so price is not value and value is not always the price of things and this comes down to buy low sell high if you understand fundamental principles on why something is a bargain or cheap or fair value rather than it being expensive then your filtering out I guess a lot of you're not really fomoing right you're not gonna fomo because prices of you know you just seen a massive you know green candle or a red candle or bullish candle bearish candle you're not gonna fomo into certain price action because in fact there are times where again due to liquidity yeah let me just draw this out and I should have been drawing this out due to liquidity you can have let's say for example you could be long on the trade right have a long bias and then you see a massive bearish candles how many times have you seen like a massive bearish candle right and then all of a sudden it starts to reverse yeah and that's because or bearish candles or bearish price action and that's because what the financial institutions were doing right if this is pricing this is time yeah what they were doing was while you know traders were following and following into price action going short what they were doing was taking the other side of the trade and buying yeah and then they because they understood the value as prices come down is cheap they're not chasing price all right so with that being said you know it's all about understanding you know the fact that you want to identify value and if you know the value is cheap at the moment and buying low and selling high and sorry going back to you know trading in the same direction as the as the financial institutions this is just some proof as to what you know the financial institutions do right when they come out with their analysis this is ing bank they make forecasts and it's it's based you know their forecasts and and and directional bias are based on what's happening fundamentally right you've got you've got ing bank you've got city bank talk about why they're going to be you know what their bias is what their forecast is what their key levels are and it's all centered around you know central bank policy and risk sentiment all right so it's not you know me Leon Rose saying this and and hypothesizing on what the banks are doing if you you know the internet you can you can look this stuff up and you know the banks tell you what they're actually doing and the banks are not trying to mislead their their their subscribers right they're not trying to be wrong there's a difference between you know mainstream media and and what you know the banks are actually doing right yes there are situations where banks are wrong right not 100% right all the time no one no one is right but the point being is that they base their buying and selling decisions over the medium to long term and even in the short term and can do obviously on their fundamental and risk sentiment bias yeah it's not necessarily driven by you know technical levels technical levels are what we use is just to to try and get into and out of trades right and identifying where potential bargains are anyways applying the correct strategy to the correct market state and this is important right because if you don't understand what the drivers are let's say for example you have a central bank that is looking to high crates right which should appreciate a currency and central bank is looking to cut rates which should be deep appreciate or devalue the currency right because currencies are trading traded in pairs what should happen right again over the medium to long term you should have a trend right if this is for example the the dollar yen right right dollar yen where the dollar is hiking rates and the yen is you know cutting rates for example I mean at the moment they're looking to probably hold rates but you will see this happen right in this trend right now if you understand this and you're trying to trade a you know you got a strategy that you know works really well when you know price action is going sideways and I hesitate to use sideways it's more it's it's an auction right it's a fair value auction is what is actually happening but just from a descriptive perspective you know traders will say a ranging or sideways moving market then you're gonna get crushed right you're gonna you know sell a certain levels and you know maybe not buy a certain levels etc your strategy is just not gonna work and you'll that you're there scratching your head as to why the strategy isn't working when you should understand ultimately that the market is in a trending you know face and similar to that where you have maybe two central banks there might be you know hiking rates at the same time and might all might be cutting rates at the same time or might be holding rates at the same time you should right have a market state where you have a range what's known as a fair value auction right because you know it's a straight in a straight fire it's just a case of it's in the greed value between what's you know where where sellers are and buyers are yeah and and so you know if you if you understand that there's two central banks hiking rates cutting rates or holding rates this is what typically should happen in that environment if you're trying to apply a trend trading strategy to a market fundamentally that is likely to range yeah or auction accumulate phase then it's just not gonna work right but you will never know this you will never have any idea of what is going on if you don't understand what really against the masters of the universe are trying to do with currencies yeah and that you cannot it's impossible to tell what a central bank is doing just by looking at price action so we need the assistance we need the assistance why do anyway if you don't and good for you right but you know I need the assistance of understanding what the central banks are gonna do therefore what the financial institutions are also looking to do right the ings the city banks the mufg's the a and z's the HSBC's the parties of the world's are also going to do right because they look at what the central banks are doing and they look at the fundamentals and risk sentiment yeah so applying the correct strategy technical strategy to the correct market state and also selecting the best currency pairs right that comes down to you know understanding why you should trade the dollar yen and maybe not for example the the the maybe the Aussie dollar US dollar for example if there's two central banks hiking rates maybe you don't want to trade that take that currency pair if you have a trend trading strategy knowing that maybe those two central banks are strong at the moment and then prices might range so you can adjust which is what we constantly have to do be fluid in our decision-making and recognize when things are changing because many traders will have a great you know we'll just luckily you know pick a trend right not understanding the underlying direction for why you know there is maybe for example a long trend today will say something silly like oh this is my favorite pair until all of a sudden you know fundamentally something changes then all of a sudden you get maybe a ranging market and then they get chopped out here and here and here and here and if they didn't know what was going on fundamentally or risk sentiment wise they basically give them back all their their profits from the trend right so you have to be aware or I would say fundamentals make sure aware of that state and it gives you fundamentals and this sentiment analysis gives you the confidence I guess and to hold trades for longer why you know would we ever get out of a trade why would I ever just take a one-to-one trade or scalp when I understand that you know in again the medium to long term a trade could go potentially for hundreds or even thousands of pips right if you don't understand that you know there are again entities essential banks that are actively looking to either you know appreciate or depreciate a currency over the medium to long term to help their economy to help the economy of the country that they're based in taking a trade and only scalping for like you know 20 pips for me is absolute madness right is absolute madness and it's very difficult I guess for traders to to hold trades right if you don't understand what's going on behind the scenes you're just looking at your your your P&L right your profit and loss and you're saying okay well I should you know just just take this profit and then try to get in again at some you know later time right which is and is again there's nothing wrong with that if you want to do that but it makes life a whole lot easier if you can if you manage to buy low for example right and then get in on the trade and then just ride the trend and not have to go through the the the nonsense of trying to reenter trades taking profit re-enter trades taking profits when you can just trail your stop you know behind swings right that's all you're really doing and riding the trend that way so it gives you a lot of confidence and this is not just me saying this this is again if you you know watch the playlist that I've created where I interview traders who have been in the group who are applying fundamental analysis to their technical trading and to my technical trading as well because I do provide technical analysis supply and demand strategies you'll hear them say it as well right it's not just me saying this is it's them you know the people who are just like you watching this video and was wondering whether you should whether they should apply fundamental analysis and they're seeing the benefits of applying fundamental analysis to their technical to technical trading so it gives you the confidence and then helps with the psychology knowing that you've got influences you know you've got a high degree high probability of a trade going for again hundreds of pips and not taking profits too early and then missing out and then foam owing in and not following the strategy right and less is more right so brokers want you to over trade and that is absolute fact that's their business model right they make money on the spread so they want you to over trade and they want you to trade during periods of of illiquidity right I want to trade they want you to trade all hours of the day all hours of the night when ultimately the right trading opportunity in bargains aren't you know don't appear every single day or even every single week right depending on you know what pairs you're actually trading there's always an opportunity to trade always an opportunity to trade you know you can just take a trade right now at this point in time is a biocell trade right but is it the right trade yeah and so trading I'd rather trade you know take maybe 10 trades a month rather than 10 trades a day if those 10 trades a month were high quality higher probability trades in alignment with where the financial institutions or you know may look at that price being an absolute bargain right or the value being a bargain at a certain price and like I said just because you know you're in a price chart right and your your seeing prices come down to maybe a level doesn't mean that that level on a five-minute chart is a bargain right because the financial institutions might be looking at a 200 pit pullback a 300 people back as an absolute bargain so rather than having to trade yeah every single five minute ten minute you know support zone support level for example for your buying opportunity you know with fundamental analysis you understand you know we're looking at maybe high time frames and then zoom in down into the lower time frames you understand that you know what we're at an expensive area right now yeah in fact I'm looking for a bit of a you know a more of a pullback right to maybe some sort of fair value or bargain area and that is where we think that you know that the the financial institutions have done all they're buying and accumulating etc right and then that may be the turnaround point etc so less is more just because again someone's taking more trades than you it doesn't mean that they're making you know more profit than you the number of trades you take there's not equate to the amount of profit you will make somebody could take again ten trades a year right and make you know way more money than someone who's taking a thousand trades a year so you know for me less is more for some people it might not be but if you know you find that you're you haven't got the time to day trade or you know you're you're not focusing and you know you're in a state of confusion sometimes it's best to stop you know take a step back and actually just really observe and see where the higher probability trades are in in relation to fundamental analysis and risk sentiment analysis and then you know move on to and then pick your trades wisely now the cons of applying fundamental analysis right the cons of and again they're probably maybe more than this possibly and probably they there are but these are what I would consider to be probably like the major ones right so the cons of applying fundamental analysis and risk sentiment analysis is that there was no shortcuts there's a there can be a learning curve and learning curve meaning that you know fundamentals can be very overwhelming that you can go down the rabbit hole in terms of the amount of information that you have to filter out right because and even just trying to filter the information is is hard enough but if you you know have a mentor for example someone who's done it you know that filters out the information and it's not just forex that you know whether it's where you're trading you know commodities whether you're trading bonds whether you're trading to stock market there is a fundamental element to to everything because fundamentals really how you derive value so from the perspective of having to learn fundamentals and learning what's important and what's not that there is a learning curve and there are no shortcuts unfortunately if there was a shortcut then you know then then then we'd all be doing it and the reason why traders generally tend to stick to technical analysis it's because a they probably haven't got the time to you know learn fundamentals and most people do want to get rich quick and they do tend to take shortcuts right but there are things there are there are skills in life that just you cannot there are no shortcuts right any high level any high level skill you cannot shortcut your way to being the best at it's just literally as simple as that and also as well patience right you with fundamental analysis and I don't really see this as a as a as a con but some people will with your day trading for example we'll see this as a con and you know patience less opportunities due to directional bias so what do I mean by that with trading and going long and going short at levels technical trading solely right again there are loads of opportunities where prices come up to here and you could get a move to the downside right brilliant you make some money on there if you you know end up losing on that trade then you can you know look for a trade here right and it's just literally looking for levels to trade off of and again for some people that's brilliant for them and trading less actually may be a and having patience to only trade in one direction because we fundamental analysis there's no way in that I'm trading against my fundamental bias right so so for example let's say you know we're on a daily timeframe chart and let's say one of the things that that that can happen and it's happened to me recently right is that I've been trying to buy the dollar I've actually got into the dollar Swiss recently which made them which I'm still in that as it goes and I'm up a good few hundred pips on that one but but sometimes you might you may miss a trade for whatever reason why you might not be around on the chart you might not necessarily get the entry or the setup might not have occurred at a certain level right and if you know you got strong fundamentals you can have you know a a really strong trend and shallow pullbacks whereas you know we're looking for more deeper pullbacks because we're looking for you know bargain opportunities now let's say for example prices start to pull back a bit right and let's say you know there's a maybe a demand zone that I would like to get involved in now traders will look at that as well you should you could have just taken a short trade there down into the zone and then taken a long trade there but for me I don't think that way that's not the way I think I'm just waiting for the price to come to me yeah regardless of whether prices pull back I'm gonna miss out on you know a potential short yeah and that could be again this is a con of fundamental analysis trading whereas traders who are just trading any direction whether they go in long they're going short etc have more opportunities to take that trade but as I said before and because you've got more opportunities doesn't equate to you know more profit right because at the end of the day whether you're going long or going short if I'm right about this trade a fundamental you're right about this trade this goes you know a good few hundred pips even a thousand pips or so and you managed to ride that that trend with traders who trade short term they generally scalp and so they could take maybe you know I don't know they could take maybe 20 trades right and make potentially maybe 150 pips yeah I could take one trade and make you know 400 pips so again it's it's it's it's it's all relative right but the point being is that a con of fundamental analysis is having patience and sometimes this pullback can take you know days weeks and even months right this is time right it could take a month before you get a decent pullback into you know a demand zone or up into a potential you know supply zone right which for some traders and some people when depending on you know your approach to trading and your your expectations can be very frustrating you know people say well how am I going to get rich if you know I'm only taking you know one trade a week or two trades a week the thing is you're not going to get rich taking a thousand trades a week I believe that you know I mean I can tell you that now so so the but the point in trading is really is to understand where the right opportunities for you are and applying you know the fundamental analysis to your trading whether you do or whether you don't right because this is what it's about this is just understanding the pros and the cons of applying fundamental analysis to your trading and whether you want to and in you know my humble opinion you know technical analysis trading if you're still watching this video obviously a loan isn't working for you right it's just as simple as that because if it was you wouldn't be looking at learning fundamental analysis you'd be just getting on with taking trading your technical analysis strategy but you're here for a reason you know and if you're not succeeding with fundamental I should say technical analysis only then you know there's something more that you really have to do and there are people out there that make technical analysis work great for them I wish I could make technical analysis work for me it would make my life a whole lot easier if I could but like I guess the movie The Matrix once your eyes have been opened to the reality of things or my you know a certain reality of how the markets work once you understand the fundamentals you know it there's no moving there's no turning back and also as well with a bit of when I was talking about a learning curve with a learning curve like every learning curve you know if you're down here for example and you're seeing to yourself all my days I've got to climb that steep mountain I don't know you know how I'm gonna you know learn all this stuff once you start learning like riding a bike it starts to become second nature and rather than climbing up a you know a steep mountain you get to the top eventually and it starts to become a lot easier and then you know I wouldn't say you necessarily go on autopilot but you things become automatic right more automatic you're not thinking about things as much as when you were learning again this happens with any skills at the beginning there is a barrier to entry right and that barrier to entry is time and dedication and you regardless of you know how many however many years I've been training fundamental and resentment analysis it's always a level of hard work that needs to go into it but trust me the guys in my group now understand you know all scenarios they can trade in any environment and it does get easier right it does get easier and it doesn't get as difficult to learn you know what to look for and basically filter out the noise so there is some positive you know things around around fundamental and learning even though again have a learning curve and there are no shortcuts there are you know huge benefits to that and again if you did want to watch the the interviews and I say I put interview there but interviews with with some of the guys as well as a playlist number one is with Ken I think I've got maybe about seven or eight interviews with traders in the group and they're all explaining and and they're their experience with fundamentals there you know where we're trading before they join trading 180 and how they apply fundamental analysis trading as well as some of their biggest trades using fundamental analysis anyways guys I hope you found that useful and take care and if you do apply fundamental analysis to your trading I wish you all the best if you don't if you found this this video a bit like oh well you know what the cons outweigh the pros then you know I sincerely wish you all the best of luck with your trading take care and their speech you'll soon