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.


    • Trade time

    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.


    • Tip

    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.

Members Comments

  1. Profile photo gravatar of Amani Herzog
    Amani Herzog (lesley-kirlin)

    Fundamental Analysis is important because economic events overall effect the market trend. Watch for important events before getting into trade because analysis can go wrong if number don’t come up according to expected value or there is a change in tone of Central Bank Chair.

  2. Profile photo gravatar of Derek Schuppe
    Derek Schuppe (justice-ebert)

    Fundamental analysis is a way of looking at the forex market by analyzing financial, economic and political news that may affect the supply and demand of an asset. It is a way of analyzing the potential moves of currency through the strength or weakness of that country’s economic outlook. Some of the most important news that can move the price is Interest rates, GDP, CPI, NFP, Unemployment rate, Speeches of the governors of central banks and Political elections. A trader should understand why particular event affects a country`s economy; A positive economic outlook is good for the country, and their currency should strengthen. The better shape a country’s economy is, the more foreign businesses and investors will invest in that country, meaning the demand for the domestic currency will increase in contrast to others.

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