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Watch Your Fundamentals

When I first got into trading, I based my strategy on 100% fundamentals. To me, a currency was the equivalent of a nation's stock. Just as a company's stock usually drops when it reports lower-than-expected earnings, so will a country's currency fall if it shows, for example, weak economic growth. That's the theory. I thought if I could manage the fundamentals, I could predict where the nation's currency was going—and with that knowledge I would make winning trades.

I also thought the law of efficient markets would protect me. This law means that all important and relevant information about an investment is already known to investors, who use this information to determine an investment's true value.


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