What is Fundamental Analysis

The fundamental analysis is the study of economic, political and social date to quantify the economy in question, with the aim of establishing the future movements of financial market.

Analysts are divided over many years in two camps, but in truth there are very few pure technical analysts or pure fundamental analysts. The technical analysts can not totally ignore the effect and timing of economic announcements, the fundamentalists as they are aware of the various signals that are derived from historical stock prices and volatility.

It is truly difficult to take into account all these various economic and political announcements and social situation affecting the economy, particularly given today’s global marketplace. However, it is possible to significantly improve our understanding of financial markets if we know in detail the various foundations of the economy.

Although there are myriads of economic announcements it is important to know the program, to understand the nature and their possible impacts, it is very easy to get bogged down in this great quantity of information and to find in the inability to establish an effective basis for trading.

Because many of the large number of foundations, it would be wiser to focus on the movements of the main courses, rather than trying to have little knowledge about everything.

Economic indicators
The economic indicators are numerous updates treated as data that reflect the financial, economic and social atmosphere. They are issued by different government agencies or the private sector. These economic statistics are anticipated by the public and are triggered at times according to a predetermined program. Many use it to closely monitor both the health and strength of an economy. Participants anticipate the outbreak are so numerous as the ads themselves, often create an increase in volume and can many times to move the prices of various instruments very quickly.

The daily economic updates are so numerous, that it is better to know only a few important announcements to try to remain up to date.

You will find in the following paragraph a guide to economic announcements.

  1. Economic Calendar
    It is essential to know the exact moment at which the economic indicator should be triggered. It is important to keep a diary on your desk or on your position as “trading” in order to remember the name of the indicator, the date, time and the expected outbreak. (See economic calendar). Often this is not the announcement that the market is reacting, but rather anticipation of an announcement, sometimes several days or even weeks before the outbreak.
  2. Understanding the announcement
    It is important to understand what particular aspect of the economy data show us. There are several aspects of the economy which are measured from its growth, such as GDP, inflation - IPP or PKI, jobs - based on non-agricultural wage (non-farm payrolls) ads for interest rates, consumer confidence or spending, and so forth. Following the data regularly, you get used to each indicator and economic traits to which it refers.
  3. Focusing on indicators that we learn to investigate
    As we have already mentioned, there are a myriad of indicators that are triggered daily. It would be impossible to monitor all or even a waste of time. It is better to focus on indicators that make markets react. Attention, however, they are not static and can earn some importance as they can lose. Stay updated
  4. Anticipation
    The data may be less important than expected by the market and the real result. It is therefore important to know the expectations of the market because they are built into the price of the instrument. This is not what are the figures as well as unexpected events. For example, it is not the waiting for a rate increase of 0.25% which will change the market but rather the comments following the announcement that there will be no further increase.
  5. Understanding the press release
    Not all the upgrades trigger an unexpected movement of the market. Each new economic indicator contains the revisions of previous data published. Sometimes this can create ambiguities, if for example durable goods increased by 0.4% during the month and that the market had anticipated the fall, an unexpected rise could be the result of a reshuffle of decline the previous month. In this case the figures for durable goods may have been reported as rising by 0.4% during the previous month but given the current figures the increase in question does more than 0.1% following a reshuffle lower. The unexpected increase this month is the result of reminiscent bearish data from the previous month. It is therefore advised to check the redrafting of old data.
  6. Currencies cross
    The instruments are negotiated between one currency to another, it is therefore essential to have as much information on one than another. While one side is down and the other in a worse situation, one can get an effect quite the opposite.