Fundamental Analysis

Why You Need Fundamental Analysis

Why You Need Fundamental Analysis

Fundamental analysis is based on the factors that drive an economy. It assumes that there are supplies and demands for currencies. These factors can be predicted based on this information. Anything is a factor in fundamental analysis as long as it does not employ price.

Some of the areas that are covered are the economic state of the country, the monetary policy of the country and the forces that drive supply and demand such as social political and economic. This can mean interest rates, inflation, unemployment, gross domestic product, housing starts and many others forex trading tips serve as indicators of price action.

Based on all of the information gathered from the above one should be able to forecast what is happening and what will happen with the currency of that country. Each country will release information on a regular basis. Each announcement should be noted on the calendar so that you can find out what it is and how will affect you.

Certain information will have volatile effects on the market, some will cause some changes and others will have no effect. As an informed trader, at some point you will know what each of these things mean and what to do with that information.

Fundamental analysis involves anything other than price action. Fundamental analysis along with technical analysis is the important basics in forex trading. Each of these work together and knowing them is invaluable. When you get to where you are trading regularly, you will set up the best forex trading plan based on these factors. Do all that you can to learn about each of them and you will set yourself up for a win. The more that you study the more successful you will be. If you think this is a way to make a quick buck, you will be surprised when you lose all your money. It takes learning a lot of information and being able to apply it.

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Forex Fundamental Analysis Blog – The Problem With Forex Fundamental Analysis

Forex Fundamental Analysis Blog – The Problem With Forex Fundamental Analysis

Forex Fundamental Analysis Blog

There are basically two forms of analysis that traders divide themselves between: the fundamental and the technical. Though both forms of analysis are great in their own ways, they have their problem with them. In this article, i’ll be focusing on the problem with forex fundamental analysis.

Fundamental analysis mainly focuses on the overall state of the economy, interest rates, monetary policies which are basically the economic conditions of a country. It is always great to know how the markets move and the economics of the world as it greatly affects financial markets but solely depending on fundamental analysis to trading the market such as forex will be disastrous. By the time you receive economic news, there are other people beforehand who knew this piece of news acted on it and the result will have been reflected on the charts.

Economic news are generally skewed by the fact that they do not always factor in some main data as sometimes some countries wanted to show that they are doing well in good times and alright during bad times which is linked to political factors. They are not to be trusted 100% and can only serves as a guide complement with your technical analysis. Forex Fundamental Analysis Blog

Normally when news is released, everyone will have the same idea of the markets thus creating a herd mentality. Since everyone is talking about buying, the tendency will be might as well join in for a ride to make a killing. But those who knew what was going on chose to stick to what they always believe in and that is what the chart is telling them.

A well informed trader will use long term fundamentals together with trends spotted with technical to establish a trade bias. Short term news such as non-farm payrolls (NFP) often may develop knee jerk reactions in the market, creating false signals that mislead traders that there is a change in the market sentiment. It is only after when the dust settles that one can see the trend which the market is heading.

Having only forex fundamental analysis do not provide a whole picture to your trading decision, it is always advisable to combine with technical analysis to aid in your decision making. If you are unsure about how news can affect your trades, always look to avoid trading during high profile news release and wait till a few days while still observing the movement of the markets before you decide it is comfortable to trade again.

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Fundamental Analysis the Easy Way Part 1 Fundamental Analysis Stocks

Fundamental Analyse. ROE.

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Stock Investing – Fundamental Analysis

Stock Investing – Fundamental Analysis

This article will attempt to highlight why fundamental analysis should be a crucial part of any stock investing criteria.

Stock price charts and quotes are readily displayed across all forms of media which can result in investors being overly fixated with share price movements. Also, the visual aspects of stock price charts can lead novice investors into the following misconceptions:

If a stock traded at $ 10 one year ago and is now a bargain at $ 4
A stock with a low share price (say $ 1) is cheap whereas a high share price ($ 70) is expensive

To help novice investors start thinking like savvy investors we suggest a simple brain storming exercise. The brainstorming exercise is to compile a list questions you would ask to the owner of a small business you are interested in buying.

The following non-exhaustive list contains some of the most common questions (in no particular order):

How much income is being generated through sales?
What expenses are associated with generating this income? Advertising, rent, salaries, etc.
Are sales and expenses increasing / decreasing?
How much debt (liabilities) does the company have? Accounts payable, bank loans, etc.
How much assets does the company have? Property, equipment, value of inventory, etc.

For a quick first pass on whether the small business of interest may be a good investment you could compare the asking price to the total company assets minus any debt. Then compare the profit (sales minus expenses) and possible growth based on sales and expenses forecasts.

Notably absent from the list is what the previous owner bought the business for, the previous owner before them, the previous owner again, and so on. These questions would allow a graph of price versus time to be created similar to a stock price chart. The key point to be made is that the fundamental valuation of the business based on actual financial measures is the critical factor. Additionally, the details of previous purchases are inconclusive as they more than likely occurred in different economic conditions.

Buying a Stock is Buying a Share of a Business…

Therefore similar questions to those highlighted in the brainstorming example should be considered when buying a stock, which forms the basis of a fundamental stock analysis approach. Each publicly listed company must release their audited financial results so start using fundamental analysis criteria in your stock selection process!

Stop being fixated on share price alone. A company’s share price only becomes useful when taking the underlying fundamentals into account.

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