Considering everything, fundamental analysis is one of the most effective ways of analyzing the performance of an investment - no matter if its a forex account or a public traded company. With fundamental analysis, we can estimate how political or economic outcomes affect the performance of a specific sector of a market - like the currency market or the stock market. For reaching acceptable results, it is essential that you do your homework. That means keeping up to date with the news and other information that can affect the fundamental performance of your position, no matter if it is the economic or political realm. Some investors might find it useful to analyze newspapers, navigate through the web for breaking news, and even apply tools like economic calendar. Economic calendars are specially useful for predicting turbulence in a market. You’ll see that the highest movements are around important releases of economical information.
Archive for the ‘Fundamental Currency Analysis’ Category
Let us take a look at a thorough example of how fundamental analysis influences a specific series of trades in a forex market.
Predicting the next moves in the market is what the art of trading is all about. Of course this isn’t easy and putting this basic concept into action requires a lot of skill and experience. This is especially true in the forex market. Investors and traders have long known that the forex market is influenced by far more than just forex. The truth is, currency is influenced by many factors, political, economic, interest rates, economic growth and much more, and all are interlinked to some extent making it that much harder to isolate one moving factor.
Specifically some currencies are strongly linked to other factors, such as for example commodities. In this article we will show some examples on how you can trade currency based on movements in the commodity market and how you analyze those numbers.
In this article we will look at one of the single most important indicators used in fundamental analysis by Forex Traders: Interest Rates. Interest rates set by the eight major central banks of the world are the single biggest influence on currency rates on the Forex markets. These changes in interest rates are an indirect response to other factor changes in the economy and carry the potential to have significant impacts on the market immediately and with powerful force.
Surprise changes in interest rates is often what causes the biggest change in the market, which is why traders spend much of their time trying to predict what rates the central banks will set in the future. That is what we will look at in this article: How to predict changes in interest rates and what effect they have on the Forex market.
Forex traders can trade through many technical trading tools; for instance, the Fibonacci retracement, candlesticks, trend lines and others. They can also trade in news relying on the impact of news on the forex trade. The third virtue which gives wings to trading is fundamentals. Along with technical analysis and news trading, fundamental analysis forms the broad base on which trading is being done. It does not matter whether you play the game through robots or strategies or personally, fundamental analysis is way too important.
Forex traders usually use two methods of analysis prior to trading. These are the fundamental analysis and the technical analysis. Technical analysis reads the past and tries to predict when a stock is supposed to break or reverse in future. It uses many tools for the purpose. These may be the candlestick patterns, Fibonacci graphs, trend lines and other sources. The next method is the fundamental analysis. It basically deals in the “why” of the matter. Why does a stock fluctuate; rally or reverse. A subset of fundamental analysis is trading the news; many traders follow major economic news around the world and trade it as it breaks.
Fundamental Analysis: Market Indicators (Drivers)
The practice of evaluating the stocks of a company through the comparison of base elements in the balance sheets of a company and the general market factors is known as fundamental analysis. The most important principle of fundamental analysis is finding profitable companies in which it would be profitable to invest after comparing the management, sales and revenues.
There are basically two kinds of drivers in fundamental analysis. They are:
Fundamental Analysis: Economic Indicators
Economic indicators are used to execute fundamental analysis in Forex Market. These economic indicators point towards the various economic factors in the particular country for which the currency trade would take place. These economic indicators are brought out by different sections of the government as well as private companies.
What is fundamental analysis?
A kind of market analysis that involves studying the economic condition of different countries in order to make the process of currency trade more efficient is known as Fundamental Analysis. It provides information about economic and political events and their impact, which influence the currency market. Fundamental analysis is one of the most well recognized approaches to the analysis of exchange markets.