Fundamentals that can move the exchange rate and the lying analysts - The essential truths and knowledge that should be noticed to truly build the investment mindset that is truly important for investors - Navi+ - GogoJungle | Auto Trading - Market Analysis

Hello, I am HAKUMA.

A site that features columns on currency analysis by famous analysts and economists.

Alternatively, books on currency analysis published by well-known people in FX are extremely popular, and when you go to bookstores you can often find three or four books with similar contents by different authors lined up.

Many experts often say there are two aspects of market analysis and prediction based on fundamental analysis.

With the internet, you can now view information from securities companies or investment information sites, and I think many investors use them as references, but translating fundamentals literally as “the basic conditions of the economy” can cause more confusion for some people.economic fundamentals” and, for some, that can be even more confusing.

I occasionally read individual blogs that describe fundamental analysis, but many are simplistic and not particularly helpful in analysis.

Of course, as a point of focus it might be educational, but in actual trading professionals like analysts rarely use fundamental analysis to explain post-hoc rationalizations after the fact; real-time, useful information is surprisingly scarce.

In short, it sounds plausible and logically sound, so fundamental analysis is an excellent excuse.

Of course, there are charts where fundamentals influence trading, but in a currency pair where the choice is buy or sell, it does not help determine the direction.

To reiterate, fundamental analysis involves understanding world and country economic trends from indicators and data, and analyzing current markets and future market developments from that situation.

However, since the logical elements do not always apply to the forex market,

the market does not move in lockstep with absolutely rigid fundamental theories.

The idea that fundamentals influence the forex market is, to be precise, a superstition, and the real influence comes from professional dealers who trade with enormous capital.

This means that what is necessary in the forex market is,

more than fundamentals analysis,

to predict the trading of those dealers whose actions are influenced by fundamental elements.

Therefore, information released by experts tends to be post hoc, as trends move and fundamentals change to corroborate them.

The Current State of Analysts Looking at Past Fundamentals

Here, to not merely deny what has been explained so far, I would like to illustrate as an example.

For instance, from past columns and actual price movements, the Greece crisis in spring 2010 was similar: as the country’s fiscal deterioration became evident, major global rating agencies downgraded its government debt ratings one after another.

Additionally, with other countries facing fiscal crises, concerns spread across Europe, interpreted as euro selling and US dollar buying.

However, such interpretations are a “late realization.” If analysts and economists themselves examined Greece’s deficit as only about 10–20%, and that was a major problem enough to slam the euro, the yen would have fallen much more drastically.

Japan’s fiscal deficit is over 120% of GDP, after all...

In this case, it is natural to think that the forex market moved first, with a downtrend in the euro becoming evident, and pessimistic factors such as downgrades appearing accordingly.

Also, when President Trump took office,

from my real-time chart observations, Japanese analysts and economists predicted Clinton would win, and indeed Clinton had more votes.

But when results were finally announced, it turned out that President Trump had won overwhelmingly.

From the morning the victory seemed certain, the dollar rose sharply, and later, Japanese investors, who had initially bought into the rising price, became fearful of a steep drop and could not hold long positions.

Market trends are often accompanied by fundamental changes in the fundamentals.

In short, the conclusion is that economic indicators and various data do not decide market direction;the internal market structure changes guide fundamentalsinstead.

If you don’t understand this, please read my past articles. The ability to detect changes in the market’s internal structure, and to adapt to the market environment, is a far more valuable analytical skill and should be prioritized.

Analysts and Experts Participating in the Market Lead to Big Failures

Why do economists and analysts who are not professional traders earn high incomes?

Do you know the secret?They are skilled at how to structure the market using fundamentals as material, and that is why they receive high praise for their ability.

Using widely observed economic indicators as material, they can explain the market conditions convincingly enough for many investors to nod in agreement.

But the reality is that their interpretations and predictions are far from accurate; if they actually traded in the forex market, they would almost certainly suffer significant losses.

Many Investors Tend to Be Misled by Experts’ Opinions

If economists or analysts were always correct and accurate in their forecasts, their views would influence even professional dealers who participate in the currency market, and there would be a common understanding that would always be right.

However, when the forex market moves, market participants’ common understanding is inevitably surprised.

Of course, their forecasts can be right sometimes, but when the market corrects based on those predictions, extreme positions are unwound and trends may reverse.

Nonetheless, in many cases the market moves faster than the pace these experts anticipated.

Even former Fed Chair Alan Greenspan said that predicting the direction of the exchange rate is the most difficult, indeed impossible.

Many investors fail to acknowledge this, and some, such as students or housewives, think FX will rise or fall simply, and there are rare cases where people try binary options or FX for such reasons.

Indeed, focusing only on the potential gains can be tempting, but looking at the whole picture, it’s an illusion.

In other words, those who profit in the forex market are not those who rely on forecasts from the outset.

Experts pull out complex statistical data to rationalize the forex market. For example, “money stock” has become a term, and it’s divided into M1, M2, M3, etc.

If you listen too closely to experts with overly complicated explanations, you may be swayed by talk about “the growth of M3.”

My acquaintances who are successful investors and those who inspire me don’t know much about such definitions.

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The Reason It Takes People by Surprise…

Readers who have followed thus far may think, “Economists and analysts are quite negative about forecasts.”

However, what I don’t want you to misunderstand is that I am denying the skills or value of experts.

And I believe they have strong abilities to calmly analyze forex market conditions.

Yet even so, the market does not move based on experts’ opinions first.

If you don’t accept this premise and trade accordingly, you will be swayed by their opinions and you will end up with losses from being completely wrong.

If you listen to experts, it should be to understand the market’s current consensus on direction.

Also, understanding how market participants have built up positions based on certain perceptions is important because it helps you prepare your mindset for future market changes.

The financial reports summarized by securities companies or information sites are, in a sense, the market participants’ collective view; many investors build their positions in line with that shared understanding.

That is why when prices swing extremely, autonomous corrections occur and technical balance breaks down, the market tends to move rapidly.

This is the “surprise the market participants” effect and is part of the market’s fate.

Moreover, even with the same data, interpretations can vary greatly depending on the forex market’s current context.

In short, market participants are applying the most convenient interpretation for themselves at that moment.

In fact, when I trade currencies, I do FX day trading and binary options for short-term trades.→ My earnings and win rate from binary options

Of course, I use each trading style’s strengths, leaning toward a more theoretical approach.

However, this approach means I am less influenced by fundamental analysis and focus on removing unnecessary elements to keep winning.

While famous people have influence and can seem reliable, there is no need to force your thinking to align with their analyses as being correct.

Such rigid preconceptions and values can hinder investment performance.

Therefore, learn the right investment mindset and fundamental theory to build your investment brain.

I am currently issuing a newsletter community where you can learn investment strategies through an accessible relationship with investment theory and economics.

→What it takes to become a 30-million-yen-a-year investor, explained through a manga

If you truly want to pursue investing seriously from now on, please consider subscribing.

Well then, this was HAKUMA.