Forex fundamental analysis
Forex fundamental analysis
There are two types of analysis of financial markets, and both are equally popular. The first type
is called technical analysis, it involves forecasting prices by studying historical data, market
models, trends and behavior. The second is called the fundamental analysis, and it consists in
studying the events of the economic and financial world.
The concept of fundamental analysis
Forex fundamental analysis is rather important topic, which must be taken into consideration for
profitable trading. While doing fundamental analysis, the trader studies the current state of the
economy, as well as specific news that may have something to do, even if indirect, to his deal.
Not only economic, but also political and social news and general news can influence markets.
What is fundamental analysis for?
The study of various aspects of the World of finance and economics requires a lot of time,
however, with its proper implementation, fundamental analysis gives an effective result. In the
heart of the fundamental analysis, as well as of any other, lies the desire not to be vulnerable to
unexpected market reactions; accordingly, the deeper the analysis, the less the market has a
chance to catch you unawares. Fundamental analysis is used by many world-famous traders,
which undoubtedly proves its effectiveness.
It should be noted, however, that even carrying out a competent and thorough analysis does not
guarantee that this particular transaction will necessarily be successful. Fundamental analysis
provides information on factors that affect the course of an asset, but the situation on the market
can change in just a few minutes, and not as expected from the analysis.
Fundamental and technical analysis
These two types of analysis are located at almost opposite poles: fundamental analysis deals with
general figures - incomes, expenditures, balances, etc., whereas in technical analysis, it is not
figures that are important, but historical data, such as past values and volumes bidding.
Traders have been arguing for a long time about what kind of analysis is better, and in fact the
answer to this question is purely individual: you need to use such an analysis that will suit you
and will best help you in working in financial markets.
How to conduct a fundamental analysis?
If you still decide to opt for a fundamental analysis, you first need to study the asset you are
trading and all the economic events that may be associated with this asset. Next you will need
reliable sources of daily news, from where you will draw important information.
An important instrument of fundamental analysis is also the economic calendar, which lists all
the main upcoming news, including, from central banks and other important financial bodies.
Next, you need to determine the range of events that are important for the market on which you
are trading, and understand how to prepare for these events.
The importance of fundamental analysis
So, it is difficult to overestimate the meaning of this analysis. As an example of the importance
of fundamental analysis, one can cite a report on employment in the non-agricultural sector of
the United States, which affects the dollar exchange rate and, accordingly, dependent on its
assets - oil, gold, etc. Before the release of the report, traders speculate on its forecast values and,
based on this, plan their deals. Actually, this is called fundamental analysis.