Forex Fundamentals with Technicals on MT4 & 5

As an intermediate trader, you’re probably already familiar with the basic concepts of forex trading. But to elevate your skills, you need to learn how to integrate fundamentals with technicals.

This powerful approach can help you make more informed decisions and improve your trading strategy on platforms like MetaTrader 4 (MT4) and MetaTrader 5 (MT5).

In this article, we’ll explain how you can combine the strengths of fundamental analysis with technical indicators, providing you with a more holistic view of the forex market.

What are Forex Fundamentals?

Forex fundamentals refer to the economic, social, and political factors that influence the value of currencies. These factors include economic reports (like GDP growth, inflation, and unemployment data), interest rates, and geopolitical events.

Traders use these to gauge a currency’s strength or weakness in the global market.

For example:

If the U.S. Federal Reserve raises interest rates, the U.S. dollar is likely to strengthen. Conversely, a poor jobs report could signal a weaker dollar.

Fundamentals offer insights into why currency pairs are moving in a particular direction, but they don’t always give us precise entry and exit points.

Technicals: The Art of Chart Analysis

Technical analysis is the study of price movements, chart patterns, and indicators to predict future market trends. In forex trading, technicals provide the “how” — they give us tools to identify entry and exit points based on past price action.

When using platforms like MT4 or MT5, you can access various technical indicators, such as:

• Moving Averages (MA)
• Relative Strength Index (RSI)
• MACD (Moving Average Convergence Divergence)
• Fibonacci Retracements

Let’s take the example of a moving average.

If a currency pair is trending upwards, a moving average can help you identify the overall trend and smooth out price fluctuations. Traders often use it to set buy or sell signals, depending on whether the price is above or below the moving average.

Combining Fundamentals with Technicals: A Winning Strategy

Now that you understand both fundamentals with technicals, the key is to integrate them into your trading strategy. Here’s how you can do it effectively:

1. Use Fundamentals to Identify Market Sentiment

Start by analyzing the economic calendar and identifying any key reports or announcements coming up.

For example:

If there’s an upcoming interest rate decision by the European Central Bank (ECB), the EUR/USD pair may experience increased volatility. Knowing this in advance helps you prepare for potential price movements.

However, remember that fundamentals don’t give you exact entry or exit points. That’s where technical analysis comes in.

2. Use Technicals to Time Your Trades

Once you’ve identified potential market-moving news or events through fundamental analysis, you can use technical indicators to time your entry and exit points.

For example:

Let’s say you’ve noticed that the USD/JPY pair is likely to rise because of an anticipated strong Non-Farm Payrolls report from the U.S. Now, you can look at the charts on MT4 or MT5 for technical indicators to help you find a good entry point.

If the price crosses above a moving average or if the RSI is below 30 (indicating oversold conditions), it might be a good time to enter a long position.

3. Confirm Trends with Multi-Timeframe Analysis

Incorporating multi-timeframe analysis can be especially helpful. If you’re trading on the 1-hour chart, check the 4-hour or daily chart to confirm that the trend is in your favour.

If the larger timeframes show a similar trend, it can add extra confidence to your trade.

For instance:

If you see a bullish trend on the 1-hour chart and the 4-hour chart is also showing an uptrend, it’s a stronger indication that the price is likely to continue rising.

4. Use News Events to Trigger Technical Setups

News events can trigger sharp price movements, so it’s important to wait for a technical setup after the event. If a news report causes a spike in price, you can use technical indicators like support and resistance levels or candlestick patterns to identify the next potential move.

For example:

After a positive GDP report, the USD may rise sharply against the JPY. However, you may wait for the price to pull back to a support level before entering a long trade.

Simple Example of Fundamentals with Technicals

Let’s walk through a quick example to illustrate how fundamentals with technicals work together:

Fundamental Setup: You notice that the Bank of England is scheduled to announce a potential interest rate hike. You believe this will strengthen the British pound against the U.S. dollar.

Technical Setup: You check the GBP/USD chart on MT4 and see that the pair has been in an uptrend for several days. The price has recently pulled back to a key support level near 1.3200, and the RSI is showing oversold conditions.

Entry Point: Based on this, you decide to enter a long position once the price bounces off the support level, confirming the continuation of the uptrend. You can use a moving average cross as a secondary confirmation signal.

By combining fundamentals with technicals, you have a clearer understanding of both the bigger picture and precise entry points.

Conclusion:

To become a more effective trader, you need to blend fundamentals with technicals. Use fundamental analysis to understand the broader market context and technical analysis to pinpoint precise entry and exit points.

This dual approach increases your chances of making successful trades.

With tools like MT4 and MT5, integrating both methods has never been easier. Remember, the key is to stay patient and wait for the right setups that align both fundamental triggers and technical indicators.