Fundamental analysis. Sounds pretty fundamental, wouldn’t you say? We have been talking about it for so long and for so much that the time has come to really look into the question. And even though the topic might seem too broad to embrace, do not worry, we are going to get through it.
What is fundamental analysis? It is a gathering of all of what is happening in the world – political and economic climate as well as various reports an inner and international policies of the country host for the currency in question. All of these things need to be observed and analyzed in order for us to have full understanding of what might happen to the price of the asset.
And sometimes it even goes beyond the reality. How often do we see markets reacting before a certain report is even issued? You can clearly see that traders anticipate a certain reaction from the report and already send the asset on its way. It is expectations are good assets are usually climbing up. If they are low, assets tend to lose price even before the report saw the light of day.
There are all sorts of fundamental data that we can base our analysis on. Current and future. And we shouldn’t forget about the past history of asset’s trading. it has an influence too. Sometimes the forecasts do not even matter – all that matters is how did the markets react in the similar situation before?
I know all of this sounds as if it is too much, but believe me, once you get the sense of it all you are going to wonder – how did you live without a fundamental analysis practice?