Fundamental Analysis - another way to look at
Whilst not as popular as technical analysis there is much to be
said for the use of fundamental analysis when making key trading
Fundamental analysis of futures and fx
markets focuses on the overall state of the economy of the
country or countries concerned as well as interest rates,
production and earnings.
Fundamental analysis of an individual company involves a study of
its management, earnings, current and future financial health,
competitive advantages and the relative size and strength of the
company when compared to others from the same sector.
Is it already in the price?
Technical analysts believe that information is already reflected
in the price of a stock or a market whereas fundamental analysts
maintain that whilst there may be short term movements away from
the true price of a market or stock that medium to long term the
price of these instruments will return to the correct value.
During these periods where the price differs from the perceived
true value trades are placed in the expectation that when the
market corrects profits will be made.
In recent years computers have been programmed to process huge
volumes of fundamental data allowing large corporations to make
immediate trading decisions and potentially take advantage of
disparity between the actual traded price and the estimated true
value before the retail market has the opportunity to do
The best of both world's...
Combining both technical and fundamental analysis when making
trading decisions is becoming increasing popular as new and
experienced traders realise that a combination of both codes can
provide market entry and exit points as well as highlighting
opportunities in under or overpriced
We have already seen how some consider technical analysis to be
flawed and the same applies to fundamental analysis studies with
some economists suggesting that neither offers useful information
to help traders outperform the underlying markets.
The majority of trading educators currently focus on the teaching
of technical analysis but with a growing trend towards the use of
both technical and fundamental analysis more are beginning to
develop courses to cater for this demand.
Tip: The spread betting and CFD companies
provide very valuable training on both fundamental and technical
analysis. Opening an account with them only takes a few minutes and
once you application has been processed you will gain
access to their free seminar and webinar events and other useful