The primary reason developing a world view that one can profit from is difficult is because of the abundance of information out there. With so much information available, successful analysis is dependent largely on ones ability to disregard unimportant information and focus on the true drivers of the global economy. With that in mind, the list of questions below can help individuals develop a world view that can be the basis for profitable speculative opportunities.
1. What is the current world reserve currency?
2. Are there any signs the world reserve currency is in transition?
3. What are supranational organizations saying about the world reserve currency? What are they saying in general about the international flow of capital? Are they implementing any policies that would change market conditions and opportunities for traders?
4. What central banks have inflationary monetary policy? What central banks have deflationary monetary policy? Which central bankers are most determined to execute their monetary policy? Money supply and interest rates are important statistics here and can be used to help answer these questions.
5. Where are their debt crises in the world? Outstanding public debt and current account statistics are important considerations.
6. Where are we in terms of market cycles?
7. What factors are causing shocks in nation-state economies? Will these factors have a contagion effect and spread to other countries? How might this affect the global economy and create trade opportunities?
Just as technical traders will like to see multiple timeframes, indicators, and price patterns to support a long/short trade view, I believe the same can be said for shaping a longer-term view using fundamentals. If we find a recurring trade opportunity showing up after asking ourselves the questions above, I think that can provide us with greater confidence in placing the trade. This can then be coupled with technical analysis to understand short-term movements, and to optimize performance in terms of buying dips, selling rallies, and ensuring risk is properly managed at all times.
Simit Patel is the founder of InformedTrades, a community dedicated to helping individuals learn forex trading. The community contains numerous free courses, discussion forums, and product reviews (such as this review of Nial Fuller ).
