Fundamental analysis

Fundamental analysis: The analysis of an asset’s inherent value. In forex, indexes and commodities trading, it examines current affairs, economic reports and policy announcements. In shares and share indexes, one analyzes the institutional and corporate components of the issuing company, as well as its business environment.

Fundamental and Technical Analysis

Fundamental & Technical Analaysis - text

There is much debate as to what type of analysis is best but an informed trader needs to have a good understanding of both technical and fundamental analysis.

Lets start with technical

Technical analysis is the methodology of forecasting the direction of prices through the study of past market data taken from charts.

Technical analysts focus on charts in isolation and do not take into account any other external factors when making their trading decision, like economic, social and political forces that can affect the price of a financial instrument and instead focuses on chart patterns, key price levels and chart indicators to predict potential price movements based on this historical information.

The theory is that all current market information is reflected in the price and if this is the case then price action is all we would need to trade effectively

What is Fundamental analysis?

Fundamental analysis is the study of the economic, political and social factors which affect the price of an instrument.

Unlike technical analysts who study charts in isolation, fundamental analysts focus on the supply and demand variables that determine price direction

The subject of fundamental analysis is a broad one. Every day there are numerous reports, news stories and announcements which can affect the supply and demand of an asset. An economic calendar, showing the days and times for these reports, is an essential tool for any type of trader and is available on most trading platforms.

It is a trader’s job to interpret this information and pick out the key data that is most likely to result in a significant price move.