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Thread: Fundamental Analysis

  1. #1
    Join Date
    Aug 2014

    Default Fundamental Analysis

    What is Fundamental Analysis?

    Unlike Technical Analysis, which looks purely at price action and trends, Fundamental Analysis takes on a much more rigorous assessment of an asset, such as a currency.

    Looking particularly at the forex markets, fundamental analysts look at key elements that are likely to have a bearing on the strength or weakness of a particular currency such as economic data, political factors and even the impact of natural disasters.

    For example, in property investments, some may buy a house on expectations that as the house is placed within a growth area, its price should rise in value. A fundamental analyst however, would look at its foundations, insulation, history, the surrounding schools and any scope for improvements before deciding to invest.

    Similarly, when trading the financial markets, fundamental analysts utilise all pieces of available data to help them to gauge the strength of a particular asset such as a share or currency. For example, fundamental analysts pay particular attention to the release of key economic data and reports such as unemployment and GDP data, interest rate announcements, production data, etc.; to determine the future direction of a currency's price movement whilst share traders would look at earnings reports.

    Key Factors of Fundamental Analysis

    Company Earnings
    Company earnings forms a crucial part of fundamentally analysing a share price and whether its current prices are undervalued or overvalued. Fundamental analysts also look for guidance from earnings reports on profit projections whilst also looking at key contributing elements to the bottom line, and utilise this information to ascertain whether a company may outperform or underperform future earnings.

    Natural Disasters
    Natural disasters such as flooding, hurricanes and tsunami's can have a major impact on the fundamental strength and weakness of an asset. For example, the 2010 tsunami in Japan had a debilitating impact on the region's manufacturing sector, causing significant disruption to the production of mobile technology and automakers. At the same time, the tsunami also increased expensive insurance claims which weighed on the balance sheets of major insurance firms.

    Economic Growth and Output
    Key indicator: Gross Domestic Product (GDP) calculates the sum of goods and services produced within the country. It is one of the most important indicators of economic growth and output, thus telling us about the economic strength and performance of the country.

    Key indicator 1: Consumer Price Index (CPI) measures the change of the average price of goods and services paid by consumers. It is a major indicator adopted by the government for its inflation target. It has a significant impact on setting interest rates.
    Key indicator 2: Producer Price Index (PPI) measures the changes in the price of goods and services at the producer's level.

    Interest Rates
    Interest rates have a direct impact on currency rates. The demand on the currency with a higher yielding interest rate is often greater than the one with a comparatively lower interest rate.

    International Trade
    As the demand for goods and services from a particular country increases, demand for the country’s currency also goes up. Thus, the value of the currency will appreciate.

    Political Situation
    Political crisis and uncertainty in a country often have a negative impact on the demand for the currency. When a country is politically unstable, investors’ confidence in its economy also decreases.

    Fiscal Policies
    Fiscal policies such as budget planning, government spending and taxation encourage or discourage productivity and spending in the economy, thus having a major impact on the currency markets.

    Monetary Policy
    The monetary policy adopted by Central Banks has a big influence in the near term demand for currencies. If for example, the Bank of England adopts a hawkish monetary policy, this indicates that interest rates are set to rise and may increase the demand for the pound sterling, which could therefore appreciate as a result.

  2. #2
    Join Date
    Nov 2014


    Fundamental analysis should be understand by trader, i also still learning here. And i also try to more maximize forex analytic and market new to help me more understand about market forex then i can maximize my trading result here

  3. #3
    Join Date
    Dec 2013


    Quote Originally Posted by Lucien View Post
    Fundamental analysis should be understand by trader, i also still learning here. And i also try to more maximize forex analytic and market new to help me more understand about market forex then i can maximize my trading result here
    We must learn it too, we can not rely on technical analysis only when trading. Every trader also want to earn profit consistently in forex, but if we do not have enough skills and also do not want to improve it, do not expect that we can get what we want.

  4. #4
    Join Date
    Jan 2015


    The Very Basics
    When talking about stocks, fundamental analysis is a technique that attempts to determine a security's value by focusing on underlying factors that affect a company's actual business and its future prospects. On a broader scope, you can perform fundamental analysis on industries or the economy as a whole. The term simply refers to the analysis of the economic well-being of a financial entity as opposed to only its price movements.

    Fundamental analysis serves to answer questions, such as:

    Is the company's revenue growing?
    Is it actually making a profit?
    Is it in a strong-enough position to beat out its competitors in the future?
    Is it able to repay its debts?
    Is management trying to "cook the books"?

    Of course, these are very involved questions, and there are literally hundreds of others you might have about a company. It all really boils down to one question: Is the company's stock a good investment? Think of fundamental analysis as a toolbox to help you answer this question.

    The term fundamental analysis is used most often in the context of stocks, but you can perform fundamental analysis on any security, from a bond to a derivative. As long as you look at the economic fundamentals, you are doing fundamental analysis. For the purpose of this tutorial, fundamental analysis always is referred to in the context of stocks.

  5. #5


    These fundamental factors are very important and it effects the market to a great extent, some factors related to fundamentals cannot be predicted and you should watch out for that.

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