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Fundamental Analysis with Yohay Elam

Fundamental analysis is analyzing the stock market by looking at economic, social, and political forces and observing how they impact currency prices. Yohay Elam—the founder of Forex Crunch and the Senior Analyst at FXStreet—is enthusiastic about technical analysis, macroeconomics, fundamental analysis, and everything related to market movement. How does he use fundamental analysis to make trades? What does he look for in the market? Listen to this episode of How To Trade It to learn more!

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You’ll want to hear this episode if you are interested in…

  • [2:03] How Yohay analyzes the market
  • [3:53] Unpacking fundamental analysis
  • [7:05] What clues do you look for?
  • [9:41] Using fundamentals + technicals
  • [11:35] The interaction of the Fed and the dollar
  • [16:47] A conversation about cryptocurrency
  • [21:10] Plan your trade and trade your plan
  • [26:04] The technical confluence detector

The key components to unpacking fundamental analysis

Fundamental analysis is what makes the bigger moves in the markets. His job is to try and understand the narrative and how the market will react, and share that in advance. Yohay analyzes the markets in the morning and publishes an article that highlights what’s moving the markets. That can include politics, the federal reserve, oil prices, gold prices, etc.

He focuses on trying to understand what’s priced into markets. For example, the Pound is currently strong and the Yen is weak. Why is that happening? In the UK, their vaccination campaign is moving swiftly, which gives them a health advantage. The Yen—since 2007—has had historically low interest rates. Now that we are optimistic about the future, the Yen has more room to weaken and the pound can gain ground.

What fundamentals should you look for?

Will the fundamentals continue to be strong? Or will there be a reversal? The biggest market mover is the Federal Reserve in the United States. Every word they say matters. If the Fed accelerates how they’re buying bonds, the dollar may taper down. If they taper the buying of bonds, the narrative will change in favor of the dollar. Any change in the storyline makes a significant change on the charts.

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Using fundamentals + technicals together

Fundamentals drive the bigger picture that you see on the monthly chart. For entry and exit points, technical analysis can be quite useful. Yohay likes to watch the relative strengths index to see if something is oversold or overbought. One of Yohay’s favorite strategies is the golden cross and death cross.

When the 50-day moving average crosses the 200-day, you see which direction it’s going. It’s a death cross if it crosses to the downside and a golden cross if it crosses to the upside. You can see patterns jump from the chart. You don’t need to draw perfect trendlines. The simpler, the better. When it comes to stocks, volume and flow are important. But currencies are such a huge market, so the fundamental picture has the most impact.

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The interaction of the Fed and the dollar

When I see the stimulus packages continuously being rolled out, I see that as negative for the dollar. It’s just more currency being flooded into the economy. Yohay points out that it makes sense, but if the Fed says there won’t be inflation, the dollar will still strengthen despite the narrative. If the Fed is concerned about inflation and raises interest rates, it will strengthen the dollar. Yohay believes we may see a change in narrative toward the end of 2021. But for now, he sees things remaining as they are.

Does the Federal reserve have to see economic growth? If they raise rates, doesn’t that cramp the economy? The Fed wants to see more people get back to the labor force. They’re looking at how many people lost their jobs and are allowing inflation. They won’t raise rates until the workforce strengthens. We might be in a new era where interest rates won’t rise much at all. Yohay believes something would have to change dramatically for interest rates to go up.

Plan your trade and trade your plan

Yohay notes that the old cliche is true. You need to plan your trade and trade your plan. He emphasizes that you should never risk more than 2% of your account, or you run the risk of burning everything and not having the time to learn.

He also believes that you should analyze your trades—including the winners. You need to understand why they worked. If it worked because you did things right, keep doing it. If you were just lucky and made a decision without following your rules, that can fail next time.

Managing your trades well is what gives people the edge. If you weren’t already in the position you’re in, would you take it? Do your trading rules tell you to? If the answer is “no,” why are you still in it? Hope is not a strategy.

Listen to the whole episode for a conversation about cryptocurrency and some of the tools Yohay uses to look at fundamental analysis!

What can you do to become a better trader? @forexcrunch shares a few tips in this episode of How To Trade It! #FundamentalAnalysis #StockMarket #Stocks #Stock #TechnicalAnalysis #Investing #Invest #Investment #Trading #StockMarketInvesting #Forex Click To Tweet

Resources & People Mentioned

Connect with Yohay Elam

Connect With Casey Stubbs

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