Trading, while generally complex, can become remarkably straightforward when fundamental analysis, particularly high-impact news events, is understood and applied correctly, allowing for high-conviction trades.
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Hey guys, I hope you're well. So,
trading as a whole is definitely not
easy or simple, but in certain
situations, if you know what to look for
and you prepare correctly, it can be
very straightforward. Like, extremely
extremely straightforward. For example,
this trade right here is probably one of
the most basic trades I've taken so far
this year. And it just goes to show how
effective and how important it is to
understand fundamental analysis. More
specifically, this high impact news. And
you've probably been told to stay away
from it when in reality, the sooner you
learn this stuff, the sooner you'll
become profitable. So, let's run through
it all and let's break it down. So this
trade was taken based off this high
impact news release right here and this
was an interest rate decision from the
RBA. So the RBA just stands for the
Reserve Bank of Australia. So for some
context, the current rate before
obviously the print was released was at
3.6%. Right? So this was their current
cash rate and they were forecasted for a
25 basis point hike to 3.85%.
Right? Now we also had a Reuters poll
from economists showing that 24 out of
31 expected a hike. Seven of 31 expected
no change. And then we also have which
I'm not going to get too into here, but
we had a lot of past economic data
pushing towards um that would that would
make the central bank hike rates by the
25 basis points. Right? So we can see
here that the markets are really priced
in and they're really expecting this 25
basis point hike to 3.85%. Now in this
situation, a hike is most likely not
going to cause much strength, right?
Because when something happens to the
markets that they already expect, it's
unlikely to move aggressively because
the market's already expected, right?
already priced in. Just think about
saying something to someone that they
already know, they're probably not going
to have much of a reaction. But if you
say something they don't know, like for
example, if we had a 50 basis point
hike, that is where you're going to see
those aggressive moves because it's not
what the markets are expecting, right?
So if we do get that hike rate, which is
most likely what we're going to get,
obviously we did get that, but if we do
get that hike rate, we're just really
not going to see that much strength
because we're already priced in, right?
So what that's going to do is is that's
going to shift the focus from the cash
rate to actually the main focus is going
to be on the statement, right? Given
that we have the cash rate as
forecasted, right? So you have to
remember this is very very highly priced
in there is a very very big chance that
this is going to be the the the rate,
right? So which is what we already
expect. So now the focus is going to be
on the statement. So when we're looking
at the statement, we want to look at are
we receiving hawkish language, right?
Are they using doubbish language or are
they giving us any forward guidance,
right? potential things that they're
going to do in the future with rates,
just any forward guidance, right? So, we
need to kind of look at this statement,
take out different excerpts from the
statement and see again, you know,
hawish, doubbish forward guidance. What
are we getting from this? Because this
is kind of going to give us the
potential move because if we just get
that that rate as as we're expected, you
know, we're not really going to move
that much because the market's already
expecting it. Okay, so this is the
release right here. You can see that the
cash rate comes out as forecasted,
3.85%. Okay, so I'm looking at my
economic calendar. I see 3.85%. I think
okay that's what the markets are
expecting and then I automatically shift
to the news feed to see what the
statement is saying right I want to see
key specific things from the statement
which could potentially again give us
doubbish hawkish language or potential
forward guidance right so here are some
of the statement right inflation in
fourth quarter was materially higher
than expected partly due to less
persistent factors today's policy
decision was unanimous labor market
conditions remain somewhat tight and
have stabilized in recent months there
are uncertainties regarding the outlook
for domestic economic activity and
inflation as well as the extent to which
monetary policy is restrictive. Okay,
the key thing here uncertainties, right?
So these comments, I'm not going to get
into it too much, but basically these
comments give us a hawkish tone, right?
So potentially, is this going to lead to
more rate hikes? Right? Are we going to
hold these rates higher for longer?
These is hawkish tones, right? So this
hawkish tone is going to cause that
Australian dollar strength. So when we
do have, for example, the rate hike,
we're going to shift straight from the
hike straight down to here to the
statement. We're going to look at the
statement, understand what it's actually
talking about. Are we getting anything?
Sometimes they'll say something very
hawkish and then and then they'll back
it up with saying something very
doubbish. So we don't get that kind of
clear way. But here with these comments,
these give us a hawkish tone. So we can
expect to see from those comments a rise
in the Australian dollar obviously from
that hawkish tone. Right. So now let's
jump into the charts so I can show you
what I'm looking at technically. Okay,
so we're on the charts and this is the
trade right here. You can see it was a
pretty quick trade but it was very
profitable because I did go in quite
heavy. So, let me just come down to the
one minute just so it's a little bit
easier to explain, a little bit easier
to see. I did enter this trade in the
fiveminute, but I'm just going to come
down here. Yeah, just so it's easier to
explain. Right. So, leading into before
we have like a high impact news release
just like this. I want to see if we can
find ideally a range before we get that
release. Right. So, you can see here by
looking here, we don't really have a
range. So, obviously, not every time we
have a range, just like this time. So,
the next best thing I want to look for
is significant highs and lows. just some
kind of structure points that I can then
base off to see breaks of structure to
either the upside or the downside.
Right? Obviously in this case it was to
the upside. So I want to mark off a high
here and then a low here. So now that
I've got those marked off, the next
thing I want to look at is obviously the
economic release, right? So you can see
this very strong candle here was
actually the release itself. So we do
get that obviously like I've explained
that 3.85% as forecasted and I remember
looking at the charts for the first few
seconds price barely moved because again
that's what was forecasted that was what
was mainly priced in. Right? Right? So
when the markets get that, it's not
really any new information. So they
don't really move that much. So my focus
goes from the economic calendar to then
the news feed to kind of read those
statements from the RBA. Right? So that
is where the main focus is. And as I'm
trying to skim over those, obviously I
have to do it quite quickly. So I have
to see kind of what tone that we get
from those those statements. Right? So
obviously like before I explain, we do
have those hyish statements. And then I
want to see okay, I'm expecting
Australian dollar strength. I want to
see the Australian dollar against the US
dollar obviously here push up and break
above structure. Right? So let me just
come back to the five minute just this
is this is actually what my entry was
on. So I can see here price is slowly
pushing up. I was actually wanting to
enter when price was here but I have to
obviously sit on my hands and wait to
get that clear break of structure.
Obviously I need to follow my plan. So
we get that break of structure. Price
throughout here was still moving quite
slowly which is great. It almost yeah it
was really really easy. Entered here
just straight away as we broke really
really good entry. Um, and then stop
loss obviously here below uh this low,
right? Or at this low right here. And
then I'm going to target this key level
here, right? I did have a full TP um at
this up at a different high, but I did
take out around 90% of the position
right here just because like I mentioned
before, I was in quite heavy and the
main goal for this trade was just to
take advantage of that initial kind of
push, the initial surge and then get out
as much as I could, right? So I did take
out 90% here. Um, and then I did put my
stop loss just obviously at break even
but a little bit up to to catch those
fees, right? Obviously, if I put it down
here, then I would be still paying fees.
So, just enough to to yeah to pay for
those fees. And you can see here price
obviously did go straight up, hit the
take profit, which is great as I
expected, but we did end up taking out
that 10% runner, which is totally fine.
I am actually looking potentially for
something to continue up here, but I'll
have to look at that later. Um, but
yeah, you can see we enter, go straight
into profit again. Price was moving
quite slow, quite steady, um, which
would made it trade even easier. um push
straight in 90% out here stop loss to
cover those fees stops below here and
you can see obviously how important it
is and how kind of effective it can be
to understand kind of the fundamentals
again I like to think of it as the
fundamentals give me that reason why and
then the technicals is that break that
kind of the reason when to actually
enter the trade right so again this was
a very very straightforward trade not
every trade is like this I wish every
trade was like this because then it
would make my life a lot less stressful
but unfortunately it's not right there
are things that get a lot more
complicated but something like this is
great to have it just feels feels almost
like a no-brainer trade. You can get in,
go quite heavy, and feel like it is,
yeah, a very, very high conviction
trade. So, I hope you found this video
helpful. Um, if you want to actually
trade live with me and do this live and
learn how to interpret the fundamentals,
then you can check the description. But
yeah, I hope you found this helpful and
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