Fundamental risk is a vital consideration when trading on the Forex markets. It has the potential to move the markets violently and can often be unforeseen even by top analysts and market forecasters.

Fundamental risk refers to any news or events which have the power to cause a re-evaluation of a markets valuation. At its basic level it is commonly used to describe the many news and economic reports that are scheduled for release to the markets through the course of the trading week. These aim to update the market on several key economic metrics such as trade figures, current account numbers, interest rates and employment figures. These are keenly watched by those who are involved in Forex trading as this information can affect the outlook for an economy and therefore also the future outlook for its associated currency.

Prior to the release of this economic information, a general consensus is often reached by market analysts. Therefore often these scheduled releases will be of little surprise to the market which will have already priced in the expected figures. This is known as the efficient market theory. This theorises that all known information is already accounted for in the current market price.

However fundamental analysis also encompasses other forms of market news. This includes those unforeseen events such as global and political news. Markets around the globe are increasingly intertwined. It is mostly difficult for these events to be priced into market valuations. Most commonly these factors will appear quickly and are largely unforeseen by all but the most switched on financial traders.

Therefore it is vital when trading to take account of the unexpected. Fundamental factors, when they strike the market can cause sudden shocks with the potential to damage or even wipe out your account balance. Money management and risk control are the essential determinants of long term Forex trading success.