Script

Welcome to fundamental analysis. The fundamental analyst tries to decide what a stock or currency should cost, and compares this to the current market price. This true value of a stock or currency is called the “intrinsic” value.Where technical analysts assume that all information is included in the current market price, fundamental traders believe that focusing on a single stock or currency may provide information that is not yet priced in. Based on this, a fundamental trader will open a position and wait for the market to move to the stock or currency’s true, or intrinsic, price. Of course, the market does not always oblige.The elements to include in a fundamental analysis depend on the financial product. As an example for stocks, say you believe a given field will grow, and you find a company in that field to analyze.To see if the stock is currently over-valued or under-valued, you look at the balance sheet, cash flow statement, and income statement. If the information is promising, you dig deeper.Fine, you might say, but how does this work for currencies? There are no quarterly earnings forecasts to analyze! This is true, and fundamental Forex traders instead analyze parameters that affect a currency’s value to find the intrinsic value of their currencies. For example: announcements of economic indicators such unemployment rates, interest rates and inflation. News reports also affect currency value, as do international relations, particularly with important trading partners. You might ask how fundamental analysis and technical analysis can both be right, and the short reply is that technical analysis is generally used over shorter time frames than fundamental analysis.Fundamental analysis is straightforward, but time-consuming. However, it is easy to create a system by following the economic calendars provided on your trading platform.