Fundamental Analysis of Trading
2022-08-30 16:03:56
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Fundamental analysis has a broad meaning and refers to the act of trading based solely on international news that affects the supply and demand for currencies, commodities and stocks as a basis for decision making. 

Many traders use both fundamental analysis and technical analysis when making decisions about trade timing and trade types.If you only want to use technical analysis, there are just as many sources for decision making.

Central Banks

Central banks are the main source of news for fundamental trading. Central banks have a wide range of authority; they can raise or lower interest rates (or even lower them to negative values), hold them at a certain level, announce policy shifts, use extraordinary means, intervene for their own or other purposes, or even adjust the value of the local currency. 

Fundamental analysis of a central bank usually involves reading the bank's announcements and its spokesperson's speeches and trying to put yourself in their shoes and speculate on the future direction of policy.

Economic Data

Trade economic data is quite difficult to predict. Even bankers from the world's top investment banks find it difficult to accurately predict the impact of economic data on the market.

The most important thing for economic data fundamental traders is to decide on the timing of the trade. 

If you trade long before the data release, you can go with the flow based on expert forecasts, but in this case, other global fundamental events may have a greater impact on the market. 

Trading on the eve of an economic data release usually indicates that the trader has already made a judgment on whether the actual data will outperform expectations, but this type of trading borders on chance and could end up with a serious misjudgment that could lead to a loss of money. 

If a trader chooses to enter the market after the economic data is released, he or she is most likely hoping to catch a gap in the market and get the desired price.

Geopolitical situation

Whether one wants to admit it or not, there are always countries in the world that are at odds with other countries. Such tensions or conflicts can change the supply and even demand situation for specific products, which in turn can have a negative impact on product trading.

Seasonality

Many investors will sell stocks that have lost money throughout the year at the end of the calendar year so that they can report a loss on their tax returns. Sometimes, selling before the year-end sell-off begins can be profitable. In contrast to the year-end sell-off, investors usually buy stocks in large numbers in January, a phenomenon known as the "New Year's Eve effect. The end of the month is also the peak trading period as multinational companies usually hedge their currencies, which is known as "month-end rebalancing".

Some of the fundamental factors have a long-term impact on the market, others have an immediate impact, but in either case, it is quite difficult to control them, and when you do, the gains are quite significant.

In fact, there are far more fundamental factors than that, as new fundamental trading methods are created every day. So pay close attention to the latest trends and, perhaps, you'll have a firm grasp on them!


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