Trading Fundamentals Is A Lot Like Buying A House
One of the biggest causes as to why traders fail, is because they never get to grips with the reasons why the market is moving. This video shows a great way to understanding the fundamentals.
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You understand the markets and trade with confidence. Learn more at our website here: https://financialsource.co
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We have an interesting question from a subscriber who says that they are new to the world of fundamental analysis, they’ve only been trading with technical analysis for a couple of years and they are trying their hand at the fundamentals, but they feel very out of their depth as a beginner and wants to know whether there is a way to make things less complicated.
Thanks for the question, I can understand where you are coming from, there was a time when I also didn’t know anything about the fundamentals, so I know how it feels to feel completely out of your depth with something like this, but the good news is that it’s really like any other task that you set your mind to, you don’t build a house from the roof, you build it from the ground up, and you also don’t build a proper house with a proper foundation in a week, the most important element to embrace with this journey is that it will take time.
I personally thing two of the biggest causes why traders fail is because they never get to grips with the reasons why the market is moving by studying and learning how fundamental analysis works, and the second reason I think comes down to trading psychology, because you can have all the best analysis skills in the world and have the best risk management process in the world and have the best technical strategy in the world, but if you don’t have the mental fortitude and the discipline which comes from better trading psychology a trader will probably not make it in the long-run.
So, when you tackle the fundamentals make sure that you understand that it’s one of the key building blocks of a successful trading career in my opinion, it’s something I won’t trade without, ever. For me, I won’t trade something that I cannot analyse fundamentally to establish whether the asset is too expensive or too cheap.
So, to make it less complicated as per your question, don’t think of the fundamentals as this massive vast ocean of unsurmountable knowledge that you need to acquire, but rather think of it as buying a house. Would you buy a house without knowing exactly whether that house is located, or without knowing how big the house is, or without knowing in what condition the house is in, or without knowing what you can expect to pay in municipal taxes or property taxes? You see, the reason why you would want to know all those things before you buy a house is because it helps you estimate what the house is actually worth, so that you know whether you are buying a bargain or whether you are buying something that overvalued.
Now, trading is the exact same way. Where you are as a beginner think of your journey with the fundamentals as buying a house, you’re trying to establish whether the asset you want to trade is too cheap or too expensive, and just like it will take you time to learn about a house’s location or to learn about property taxes, think of things like central bank policies and volatility and economic data in the same way, they are just all parts of the same house that you need to make a better decision.
Now, you can certainly buy a house without knowing everything there is to know about properties, just like you can trade the fundamentals without knowing everything there is to know about it. Imagine you are a property developer, you are bound to buy some things that ended up as bad investments because even though you scouted out a good location and even though the house was a good condition, you didn’t know something like property tax existed, and you know what, after that mistake you now know about property taxes and you won’t make that mistake again.
And trading is the same way, you can certainly trade the fundamentals without knowing everything there is to know about it, and just like your imaginary property developer made mistakes and learnt something new, you’ll go through the same process in your trading as well, and it’s not something you can really rush because there is so many things that simply takes time to develop and learn and embed into your trading process.
So, I want to encourage you, don’t dread the learning process, it’s an essential part of what you need to go through to become a successful trader. So, hope that helps, and if you have any other questions just let us know.
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If you find this content helpful, you’ll love Financial Source.
There’s a link below were you can learn more about it
https://financialsource.co
----
We interpret and explain price moves in real-time, 24 hours a day. Our team of analysts produce text, video and audio commentary.
You understand the markets and trade with confidence. Learn more at our website here: https://financialsource.co
-----
We have an interesting question from a subscriber who says that they are new to the world of fundamental analysis, they’ve only been trading with technical analysis for a couple of years and they are trying their hand at the fundamentals, but they feel very out of their depth as a beginner and wants to know whether there is a way to make things less complicated.
Thanks for the question, I can understand where you are coming from, there was a time when I also didn’t know anything about the fundamentals, so I know how it feels to feel completely out of your depth with something like this, but the good news is that it’s really like any other task that you set your mind to, you don’t build a house from the roof, you build it from the ground up, and you also don’t build a proper house with a proper foundation in a week, the most important element to embrace with this journey is that it will take time.
I personally thing two of the biggest causes why traders fail is because they never get to grips with the reasons why the market is moving by studying and learning how fundamental analysis works, and the second reason I think comes down to trading psychology, because you can have all the best analysis skills in the world and have the best risk management process in the world and have the best technical strategy in the world, but if you don’t have the mental fortitude and the discipline which comes from better trading psychology a trader will probably not make it in the long-run.
So, when you tackle the fundamentals make sure that you understand that it’s one of the key building blocks of a successful trading career in my opinion, it’s something I won’t trade without, ever. For me, I won’t trade something that I cannot analyse fundamentally to establish whether the asset is too expensive or too cheap.
So, to make it less complicated as per your question, don’t think of the fundamentals as this massive vast ocean of unsurmountable knowledge that you need to acquire, but rather think of it as buying a house. Would you buy a house without knowing exactly whether that house is located, or without knowing how big the house is, or without knowing in what condition the house is in, or without knowing what you can expect to pay in municipal taxes or property taxes? You see, the reason why you would want to know all those things before you buy a house is because it helps you estimate what the house is actually worth, so that you know whether you are buying a bargain or whether you are buying something that overvalued.
Now, trading is the exact same way. Where you are as a beginner think of your journey with the fundamentals as buying a house, you’re trying to establish whether the asset you want to trade is too cheap or too expensive, and just like it will take you time to learn about a house’s location or to learn about property taxes, think of things like central bank policies and volatility and economic data in the same way, they are just all parts of the same house that you need to make a better decision.
Now, you can certainly buy a house without knowing everything there is to know about properties, just like you can trade the fundamentals without knowing everything there is to know about it. Imagine you are a property developer, you are bound to buy some things that ended up as bad investments because even though you scouted out a good location and even though the house was a good condition, you didn’t know something like property tax existed, and you know what, after that mistake you now know about property taxes and you won’t make that mistake again.
And trading is the same way, you can certainly trade the fundamentals without knowing everything there is to know about it, and just like your imaginary property developer made mistakes and learnt something new, you’ll go through the same process in your trading as well, and it’s not something you can really rush because there is so many things that simply takes time to develop and learn and embed into your trading process.
So, I want to encourage you, don’t dread the learning process, it’s an essential part of what you need to go through to become a successful trader. So, hope that helps, and if you have any other questions just let us know.
-----
If you find this content helpful, you’ll love Financial Source.
There’s a link below were you can learn more about it
https://financialsource.co
