Fundamental analysisWhat Is The Fundamental Analysis?
Fundamental analysis indicates the different ways of understanding an asset, which may be an economic market of reference (in case of currencies) or a company (in case of shares).
It includes reading and analyzing economic data in order to understand the health and future movements of an asset. By analyzing the economic relationships, you will be able to understand the value of an asset and understand why it’s moving the way it is.
By doing a fundamental analysis you’ll have a better understanding when the price of currencies or an action is underestimated or overestimated compared to its current price, and this allows predicting its possible adjustment.
How do we do the analysis?
The fundamental analysis of a currency requires studying a nation’s deep market and analyzing macroeconomic index data such as the Gross Domestic Product (GDP), consumer price index (CPI), etc. eventually matching them with other economic data and political events, trade agreements etc.
The fundamental analysis of a company's shares is made mostly by assessing its economic balance, but also analyzing the company’s market sector, as well as any trade agreements and growth prospects.
Both analyses is required to be carried out byan experienced analysts.
This type of fundamental study is often referred to as macroeconomic and generally includes long time spans, suitable for medium to long-term investments.
Data coming from the newly published economic indicators (such as the Central Bank Decision, Consumer Price Index, etc.) are the movements which allow speculating in the short and very-short time, as explained in the article NEWS.
For more efficient market timing, fundamental analysis should be used with technical analysis, and probably other forms of sentiment analysis such as twitter sentiment analysis.