Fundamental Analysis  

What is fundamental analysis?

Fundamental analysis is the study of the real causes of market movements, and examines the economic, social and political factors that affect supply and demand, which is one of the main causes of price movement. It is a method of measuring the currency value by examining related economic and financial factors. Fundamental analysts study anything that can affect the currencies value, from macroeconomic factors such as the state of the economy, inflation rates, unemployment levels, interest rates, rate of consumer consumption, Gross Domestic Product (GDP), national income, price levels and industry conditions to microeconomic factors like supply, demand, competition.

There are differences between fundamental analysis in forex from the one used in other markets such as the stock market which most people are familiar with. Stock Market fundamental analysis is interested in studying the financial statements and profit rates of companies to assess the strength of the company and the value of its shares. Forex fundamental analysis, on the other hand, is concerned with studying the macroeconomic factors that directly affect the performance of the currency, and the study of some economic, political and social factors that affect the economy and impacting the movement of the currency exchange rates.

 

How do you use fundamental analysis?

The primary way to use fundamental analysis when trading forex is to follow the latest and upcoming news releases that are usually filtered by low, medium and high impact news.

 

Importance of fundamental analysis?

Through a fundamental analysis a trader can determine the value of a currency and can answer the question of whether the asset is   priced correctly and what is behind the movement in the price of an asset.

This is the most important aspect of forex trading. The release of information on an economic event will enable the investors to adjust their portfolio according to the new information.

 

What is the difference between fundamental and technical analysis?

Fundamental analysis is not meant as a short term decision making tool. Technical analysis enables traders to gain a vision of the market and make the right move at the right time, while fundamental analysis should be applied strategically, over longer periods.

 

Where do you find tools for fundamental analysis?

Remember Fundamental Analysis is very subjective. Always do your own due diligence. There are many tools that can be used for fundamental analysis. The easiest way to start is having a reliable  mainstream news outlet to feed you day to day information and an economic calendar. 

Mainstream Outlets:

Economic Calendars

In addition, our traders toolbox has additional fundamental tools and resources. To view, click here

 

Does ThatFxTrader use fundamental analysis? 

ThatFxTrader uses fundamental analysis to examine possible changes of market conditions in the short and long term. Our preferred method is technical analysis. 

 

Want to take your trading to the next level?

We offer a variety of trading courses to deliver to the needs and levels of all traders. For more information, click here.

 

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