“Fundamental analysis is complex. Yes, but it doesn’t have to be too complex.” says the BeSomebodyFX team in a recent interview I made with them.
“There are A LOT of guides, videos, and articles about fundamentals out there. Yet, most traders still don’t understand the subject properly. Or more precisely… they don’t understand the subject in a PRACTICAL way that can be put into action.”
I found that to be very true.
And so I had a lengthy chat with the team to understand in detail their thinking and views behind the BeSomebodyFX brand. And let me tell you… It was eye opening.
I gained a completely new perspective on fundamental analysis in Forex trading, completely!
And I’m sure the full interview that you can read below will be eye opening for you too.
Our interview with BeSomebodyFX:
What do you think most traders get wrong about fundamental analysis?
“Oh! Such a great starting question. Look, the reason is not just that fundamentals are complex, tho surely they can be. But the problem is often the method with which they are explained…
Most of the time it’s just useless theory that has little to no practical applications to real trading. And I don’t mean that to denigrate all the educational content out there. No!
That has a place in a trader’s learning path, but it only gets you to a certain level, a fairly basic theoretical level. Which is important and necessary, but not enough.
For instance, if I asked a random trader if the FED cutting rates is bullish or bearish for the US Dollar he would tell me it’s bearish.
Because you know, that’s what the textbooks tell you:
Rate cuts are bearish for a currency, rate hikes are bullish.
And that’s true!
But then an FOMC interest rate decision comes, they cut rates, and the US Dollar rallies 50 pips. The trader is left wondering…
What?! They cut rates but the currency rallied? Ahh, fundamentals don’t work!
But what he doesn’t understand is that markets move on expectations. The Dollar rose 200 pips in the two weeks before that interest rate decision. The FED delivered the hike, but at that point that was already FULLY priced in, the forward guidance didn’t mention any more rate hikes, and so the US Dollar pulled back in profit taking mode after two weeks of buying in anticipation of that rate hike.
I’m probably getting a little too technical there, so let me show you an illustration to give you some sense of it:
The average retail trade with the textbook fundamental education doesn’t know that!
He sees rate hike, must be bullish!
He sees rate cut, must be bearish!
He sees good data for currency, must be bullish!
He sees bad data for currency, must be bearish!
But truth is the market is a lot more complex, as you can imagine here it would get a little too lengthy if I wanted to explain detail by detail how it works, so I’m going to link you below one of our YouTube videos which goes into details on the matter so that the readers can study.”
Thank you! I’m sure the video will be highly appreciated by the reader. Now, you mentioned interest rates, can you show me an example of how to apply interest rates practically in currency trading?
“Ok, I will give you the straightforward answer to this. Because as you know it’s a lot more complex but if I had to simplify it to one core element it would be this… Monetary policy divergences. What’s that about you may ask? It’s when interest rates in two countries move in different directions. But let me get practical with a real example…
Above you can see with the orange line the BoJ (Bank of Japan) interest rate which kinda goes unnoticed because it‘s there flat at the bottom.
And in blue the FED’s interest rate lifting off.
In other words… you are looking at Japan’s rates compared to US rates.
What do you think USDJPY should do in that context?
When interest rates move, currencies trend! And when interest rates between two currencies move in the opposite direction, things REALLY trend Basic stuff! But actionable, tradable, and consistent.”
Ok! Interest rates, is that the core of what a fundamental trader should look at? Interest rates? Or is there something more?
“Ok let me show you something:
Above you can see the interest rate in the US in early 2020. You can surely see the FED there cut interest rates BIG, one 50bps cut, and one 100 bps cut. The US Dollar must have dumped hard in that context, right?!
No. And the reason is simple.
There’s one missing piece in order to PROPERLY understand the macro flows that drive markets. Monetary policy is NOT the only variable. There’s another BIG important market driver…
Risk sentiment and growth expectations.
I’m sure you heard the term safe havens. Safe havens are those assets that investors and traders fly to in times of market uncertainty and high risks.
The shiny precious metal is the most popular and well known. Of course I’m talking about GOLD. Then Bonds are also right there in the safe havens list. And then currencies like CHF, JPY, and the Dollar.
In the example above every single central bank was cutting rates aggressively, and there was a strong risk off sentiment as the world was entering into a global recession, essentially a complete halt of most economic activity pretty much. You know, early 2020 lockdowns.
At that point the market doesn’t look at interest rates that much, it just runs for safe havens. USD, JPY, CHF, GOLD, and bonds.”
Understood. This already makes a fairly complete view of how to look at fundamentals, but let me ask you now, you don’t use any technical analysis at all?
“Fundamentals for direction, technicals for entry. There’s literally no way we could be able to trade fundamentals efficiently without looking at the chart and the technical aspect.”
Got it. So what type of technicals do you use? Indicators? Price action? What exactly?
“I see technicals very simply…
It’s higher timeframe price action. And lower timeframe market structure. In fact, you will very often see mentioned both of these aspects in the trades on our public Telegram channel.
Specifically things like engulfing candles on the daily chart, and trendlines on lower timeframes.
Now, I do have very strict parameters to define an engulfing candle tho. Parameters which I think are, at least from what I’ve seen around, a bit different from others.
Basically, I define an engulfing candle ONLY when it does this…
It takes out the low of the previous candle, or high of the previous candle in case of bearish engulfings, and then closes above the other side.
Now, the reason why I like this specific definition is that it fits with what I also like to see on the lower timeframe which is this:
A fakeout of a low or high, so a break and quick rejection of that level, followed then by a break of market structure in the opposite direction.
And when you align that simple technical setup with the fundamental direction you can get some pretty good trades.”
So from what I understand your method is first fundamental analysis to understand the direction in which the market is most likely to trend to, and then you use technical analysis to find an entry, is that right?
“That’s exactly right!
Fundamentals are great. Technicals are great. But neither of those alone in isolation are enough to be consistent.
It’s when you combine both together that you get those high quality, high conviction trades.
The type of trades that you are comfortable taking, holding, and just letting them run.”
Do you prefer swing trading or intraday?
“Swing trades are my favorites to be honest. The type of trades where you just position yourself and then let the market work for you.
I find that to be much more enjoyable and efficient than having to stare at the screen all day long looking for a trade that may not even be there.
And that’s a trap that a lot of traders end up falling into.
They think that they can trade and find high quality setups every single day.
Well, truth is… it’s NOT that way!
You can’t force the market. You just have to adapt, wait, and execute only when the setup is there. And it’s not there every single day, period.”
Where can traders find out more about you?
“Our website at besomebodyfx.com
You can find all the other useful links in there like our public Telegram channel where we share insights and trade ideas, our Substack where we share education and more indepth insights every week, and other useful links if traders want to go deeper into what we do.”
Thank you! This was really enlightening.
“Thank you.”
