FX investors often wonder how to learn fundamentals analysis and technical analysis; they read books and web content, attend seminars hosted by FX companies, and gradually gain knowledge, but I’ve often heard that by consulting various opinions they become uncertain and feel they’re taking a detour.

Mr. Ere, who has a huge following on Twitter, and whose daily report combines line trading and fundamental analysis, is highly recommended as content that dispels that sense of detour.

Let me explain the reasons starting from the initial writing.

“The flow of exchange rates moving as money flows into stocks, bonds, and commodities becomes a natural progression.

To grasp the overall market, we recognize the environment using bond yields and stock charts and then translate it into the forex for analysis.

Because, for example, if U.S. investment activity increases, the Dow, the S&P, and the Nasdaq rise.

Naturally, as investments progress in dollars, the dollar also rises.

Similarly, as UK investment becomes active, those who hold pounds find investing easier, and the pound tends to rise when that happens.

Likewise, the pound strengthens.

Investing covers assets beyond stocks, such as real estate, so some things may not be obvious from appearance alone, but fundamentally this is how it works.”

It is written like that, but he writes a daily analysis report almost every weekday, using bond yields and stock charts to understand the overall environment and then translating it into forex.

2020/10/15 Update

Yesterday I interviewed him again; it was a story that would be useful to traders, so I’d like to add an update.

“Investing starts with FX, and I have been reading Bloomberg, Reuters, The Wall Street Journal, and The Nikkei newspaper cover to cover for nearly 20 years.

　You might think I’m an unusual person, but since the appearance of Wikipedia, I have read articles about every country in the world, and learning about demographics and major industries, geopolitical risks such as conflicts has become a hobby that helps me understand the balance of power between nations and aids in capturing price movements of all financial instruments.

Having absorbed this knowledge for many years, day by day, and continually watching U.S. Treasuries, the Dow, the Nikkei, and charts for various currency pairs, I think I’ve understood the mechanism by which fundamentals affect price movements.

I also receive various information from former prop traders I met online, but they all do fundamental analysis in a similar way, so I believe what I have done is correct.

However, fundamental analysis relies on accumulated knowledge and experience—based on years of practice you think, “That happened then, so in a similar situation now it will be like this.” Thus, a trader with only a few years of experience finding buy/sell decisions using fundamentals can be challenging.

On the other hand, technical analysis is something I also draw lines for, and I think it can be mastered even over three to five years, so when explaining to others I use technical analysis as the subject.”

He said.

Let us present the daily analysis report.

Here, from the July 5 market environment recognition and weekend market analysis article, I would like to present concrete analysis examples.

“7/5 Market Environment Recognition

The following chart is the U.S. 10-year yield, commonly called the 10-year yield.

This tends to rise when bonds are sold and fall when they are bought.

As noted in the previous article, you understand that bonds constitute the largest investment market in the world.

If rates are rising, i.e., bonds are being sold, where will that money go? It moves toward equities and commodities in various countries.

This is commonly referred to as a risk-on state.

Now, let’s also look at the stock market charts.

　This is the Dow chart.

On June 5, U.S. rates peaked and gradually fell, meaning bonds started to be bought while stocks were still rising a bit.

This isn’t unusual;holding bonds tends to be prioritized, so when moving from risk-on to risk-off, bonds often start to be bought first.

In other words, by watching interest rate trends you can gauge capital withdrawal or injection, making it relatively easy to time settlements and entries.

From this perspective, you’re unlikely to be far off.”

In this way,we look at the 10-year yield and the Dow to form our environment recognition.

And next is the dollar/yen.

“7/5 Weekend Market Analysis

Dollar/Yen

4-hour chart

The chart resembles the Dow fairly closely.

In this price range I expect a box range, as shown in the green box.

There isn’t any material causing a gap between the dollar and yen right now, so a range-bound move is expected to continue.

A diagonal trend line is less effective; a simple strategy is to trade within a horizontal box and cut when it breaks.

For convenience, we’ll drop to a 15-minute chart to facilitate day trading.

After confirming a rebound as indicated by the red arrows, go long.

If you cut on a break of the horizontal level, you can maintain a high risk-reward ratio.

Dollar/Yen isn’t efficient for long swings, so it should be tackled with short-term decisions.”

As described above, daily analysis reports detailing the 10-year yield, the Dow, and the status of each currency pair arrive on weekdays almost every day.

You can daily encounter the knowledge of fundamentals and the technical knowledge centered on line trading that top traders know, and there is no reason why learning fundamentals, as well as technical analysis, would not advance.

This level of concrete, information-rich FX learning content is I believe unparalleled in the world.

Written by Hayakawa

An outstanding trader's method for gauging the environment using bond yields and the Dow to time currency trades