|
Fundamental
Analysis
Whether
you trade in; be it currencies, commodities, stocks, bonds or
any other form of security, the only way to make a profit in
trading is to master the art of analyzing the market and accurately
predicting the movement of prices.
There are
two distinctly different forms of analysis in trading: technical
analysis and fundamental analysis.
Technical
Analysis is based on the in-depth study of prices. It aims to
predict future prices by analyzing the history of the movement
of prices.
Fundamental
Analysis is more of a “Big Picture” analysis;
it is based on the study of the overall economic health of the
nation. It works on the principle that the future prices of
the currency are directly related to the supply and demand of
the currency, which in turn is affected by the strength of a
nation’s economy.
---------------
ARTCILE CONTINUES BELOW ---------------
"What
if Earning $2,000 a DAY from
Forex Trading Was As Simple as Running Software That's
Designed to Emulate a Forex-Millionaire?"
And
what if it was actually legit?
It's
not a pipe dream. Literally
hundreds of traders are turning consistent, substantial
profits each month just by running one program:
Forex
Autopilot System (FAPS)
FAPS
is our top-rated trading system on ForexShortcuts.com.
And there's no reason why
you can't start seeing massive results by
riding the tailcoats of others' tried & true trading
systems...
Visit
FAPS or see Our
Full, Unbiased Review
|
------------------------------
Let’s
look at this example. When the US economy is strong and in
a major upswing, there is almost always a complementary increase
in the value of the dollar. At this time currency traders
will expectedly make heavy investments in the dollar, which
in turn increases the value of the dollar even more in a kind
of self-fulfilling prophecy.
Though theoretically
fundamental analysis sounds very straightforward and uncomplicated,
attempting to determine and keep track of a nation’s economic
status is far from easy. There are numerous factors that need
to be taken into consideration and traders are more likely than
not to read the same facts and figures and then interpret them
differently.
Fundamental
analysts study several different economic indicators in an attempt
to ascertain the strength of an economy. Some of the important
indicators that are taken into consideration include consumer
price index, interest rate, gross domestic product (GDP) and
unemployment rate.
If you intend
taking the fundamental analysis route, you should make it a
point to read reports that are regularly released by several
different government as well as non-government agencies. Find
out the dates of upcoming releases and keep track of how the
currency prices are affected. In due course, you will see an
emerging trend.
Remember
that it is not necessarily only the numbers within the report
that will influence the forex market; what is even more important
is the relation between the numbers that were forecasted and
those that were actually recorded.
What this
means is that an increase in interest rates may not have as
huge an influence on the market prices if this increase was
expected and had already been forecasted. On the other hand,
if there is an unexpected increase in interest rates despite
the fact that the trade pundits had predicted that otherwise;
this could affect the currency prices tremendously.
The biggest
drawback of fundamental analysis is that the “big picture”
can sometimes be a little too big a picture. While it is
an excellent way to forecast economic growth by and large, the
details it offers are not adequate enough to accurately target
specific entry or exit points.
|
