Fundamental Analysis – Key to Investing
What is Fundamental Analysis
Fundamental analysis is the evaluation of the macroeconomic factors influencing the strength of economies and the resulting affect on forex & stock markets.The main goal of fundamental analysis is making financial forecasts such as will currency A rise or fall in value against currency B. How you answer this question depends on how well you can decipher the macroeconomics that shapes the outlook. Fundamental analysis looks at the underlying forces that are moving the markets in question and is generally used by long term investors, but can also be used by traders to gain an understanding of the markets they wish to trade.Combining fundamental analysis alongside technical analysis, which is the study of price, can be a powerful combination which will empower you as a trader and provide you with a complete picture of the markets.When using fundamental analysis, it is important to define the goals. Given the vastness and the complexity of the field, it is easy to lose focus or get sidelined by different factors.Therefore, the first and most basic step in fundamental analysis is to start off with a currency pair that you are interested in trading. This will ensure that you stay focused on the most relevant details in order to help lay the groundwork for building a trading plan.So should you simply pick out a currency pair by rolling a dice or is there some logic to follow? While there is no rule and it is entirely up to the trader to start with a currency pair of their choice, it does make sense to stay relevant to the current markets.Example, what is the most talked about topic at the moment? Which currency or central bank’s policies are being constantly referred to in the markets? By picking the most trending instrument or asset, traders would be able to find more information and perhaps gain more knowledge by combining the technical and fundamental aspects involved.
Fundamental Analysis: Which Macroeconomic Fundamentals Influence the Markets?
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