What Is Fundamental Analysis?

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Fundamental Analysis is a study on economic, social and political factors which affect the market. Things like changes in interest rates, employment reports, and the latest political changes are all factors that can affect the currency movement. 

What is Fundamental Analysis?

PURPOSE OF FUNDAMENTAL ANALYSIS
It is supply and demand that determines the currency exchange rate. Any changes in economic, social or political condition may affect the supply or demand side, thus at the end affect the currency exchange rate. Economic factors can have a direct – and to some degree, predictable – effect on the value of a currency. By understanding the effect, trader can make a decision beforehand when economic indicators are due for release. 

The basic idea of Fundamental Analysis is that if a country’s current or future economic outlook is good, their currency should strengthen. Strong economy means strong currency.

In a nutshell, this is what fundamental analysis is: The stronger a country’s economy is, the more people want to invest in that country. This results in the need to purchase that country’s currency to purchase assets to invest. As a result, the value of the country's currency will likely increase.

 

WHO USES FUNDAMENTAL ANALYSIS?
Generally, users of Fundamental Analysis are traders with longer time frame, who want to take advantage from the changes in economic condition. These type of traders are called Macro Traders. But traders with shorter time frame can also benefit from price fluctuation during economic data release. These type of traders are called "News Trader".

 

WHAT TECHNICAL ANALYSIS CAN BE APPLIED TO?
Technical Analysis can be used on all financial products, because all always affected by economic, social and political condition. Starting from stocks, forex, commodities, futures, and so on

 

HOW TO DO FUNDAMENTAL ANALYSIS?
Fundamental analysis requires data, that can be obtained from various news, economic reports released by goverment or Central Banks.

One of the fastest ways to find various economic news. Just open MetaTrader, and you can find latest economic news cy clicking tab "News"

Fundamental Analysis is a study on economic, social and political factors
 

Hopefully this article useful.

written by
Desmond Wira
http://www.bigwinforex.com