- Joseph Barreca
Fundamental Analysis: How to make better trading decisions, Understanding what drives the market.
Have you ever asked yourself “ what moves the market “?
Almost every beginner trader is always curious to know the answer to this question. Demand and Supply moves the market. The economics of supply and demand dictate that when demand is high, prices rise and the currency appreciates in value and when we have less demand, and supply is high, prices fall, and the value and strength of a currency depreciates.
In this post, we are going to be talking about the power of Fundamental Analysis, and how you can make use of it to your own advantage as a trader.
KEY TAKEAWAYS:
What is Fundamental Analysis
The importance of Fundamental Analysis
How to do Fundamental analysis (Go-to-sites & platforms)
How to use fundamental Analysis in making better trading decisions
What types of traders need Fundamental Analysis the most? ( Scalper , Day Trader, Swing trader or Position Trader)
As a speculator or investor in the financial market you always want your confluences to be as authentic as possible in order to make the best trading decision. That is where fundamental Analysis comes in.
INVESTORS
Investing means the buying and selling of securities with the aim of attaining profits once the price rises.
Position Traders can be generally referred to as financial investors. They desire to create, pay or benefit through an agreeable profit from their capital by taking on a normal or sub optimal measure of risk. Pay can be as the fundamental resource appreciating in value, in discontinuous benefits or interest portions, or in the full return of their spent capital. Most often, investing is the act of buying and holding an asset for the long-term. The keyword here is; LONG-TERM HOLDING. This is what separates investors from speculators.
Fundamental analysis and the study of macroeconomics of certain instruments is a vital piece of the investment cycle. It includes assessing various resources, areas, and examples or patterns that are happening in the financial market. Financial investors can utilize tools like principal or specialized investigation to pick their venture techniques or plan their portfolios. By utilizing key investigation, investors can figure out what elements influence the worth of protections, from microeconomic to macroeconomic variables.
SPECULATORS
These types of traders purchase securities with the comprehension that they will be held for just a brief period prior to selling. They may habitually move in and out of a position within a day, say some minutes or hours.
Day trading is a form of speculation, they are called day traders because they trade often on a daily basis. They generally hold their positions for a day, closing once the trading session is complete. They never hold trades overnight. Swing traders, on the other hand, hold their position overnight up to about several days or weeks expecting to exploit gains during that time. This is achieved by attempting to figure out where a security price is likely to move towards, taking a position, and afterward creating a gain.
WHAT IS FUNDAMENTAL ANALYSIS
Fundamental analysis is an essential topic in trading just as the name implies. Without understanding fundamental analysis you’re likely to make bad trading decisions. Say a particular country, the United States for example releases their unemployment rate data, the higher the unemployment rate the weaker the currency of the country gets , the lower the unemployment rate the stronger USD ( United State Dollar) gets, having known that, say we now have AUD ( Australian Dollar) paired with USD; (AUD/USD).
Now it’s Thursday evening and it has been reported that the Unemployment rate in the US is lower than expected, the Us dollar will weaken causing the AUDUSD pair to rise… This is basically how fundamental analysis works, you make use of authentic data reports to give you better confluences to know where the price of a security is likely to go next , either up or down.
The sole purpose traders often study the fundamentals of a particular market or instrument is to understand better the next possible directions price is heading towards. Then they couple the information derived with a simple technical analysis strategy. The combo is what causes them to make good trading decisions. This is not a rocket science. It’s a knowledge that needs to be acquired. We teach you everything you need to know to become a consistently profitable trader here at GIT (Global Institute of Trading), reach out to us if you need any help.
Fundamental Analysis is the study of economic data information and news reports . Essential investigation on the forex market by breaking down financial, social, and political powers that might influence the strength and weakness of a particular country's currency gives a trader an edge in the market.
Fundamental analysis uses various sets of data, amongst we have historical data to check how price had performed in the past, What is currently happening in a particular country and the effect it has on their currency, including announcements made by the government officials, the body that decides the interest rate, the current unemployment rates and more.
THE IMPORTANCE OF FUNDAMENTAL ANALYSIS
Before and after the advent of technical analysis, fundamental Analysis has proven to be an important tool of determining the direction a particular instrument is likely going towards. Now the combination of the two ( fundamental & technical analysis) works like magic, continue reading.
Fundamentals are essential as it helps to know the intrinsic value of an instrument. It helps a trader to know the best time to make trading decisions.
Amongst the most important news reports traders care about are Non farm payroll (NFP), The Monetary Policy Reports, the FOMC announcements, Average Earning Indexes, the US core retail sales, Wage price index, Consumer Price index ( CPI) and more.
Nonfarm payrolls is one of the most popular one among them, it is the proportion of the quantity of workers in the United States excluding farm workers and workers in a modest bunch of other work groupings. This is estimated by the Bureau of Labor Statistics (BLS), which reviews private and government entities all through the U.S. about their payrolls. The BLS reports the Nonfarm payroll numbers to the general population consistently through the firmly followed "Business Situation" report.
HOW TO DO FUNDAMENTAL ANALYSIS
There are different ways to do fundamental analysis. But you want to make things as simple as possible to avoid confusion. GIT (Global Institute of Trading) is here to make things easy and at the same time effective for you. We bring you Institutional Markets Insight & Daily Reports, daily market analysis & trade ideas directly from Institutions such as Barclays, Goldman Sachs, Deutsche and many more.
You want to be analysing the data behind the market just like the big boys do. We got you covered in that case. Check out our report page through this link https://globaltradinginstitute.teachable.com/p/institutional-markets-insight-daily-reports. You as well automatically gain access to our free discord community https://discord.com/invite/nVqqC2dhnR
We can also be your personal coach in case you feel lost in the trading space. We provide you trading education, and everything you need to become an independently profitable trader in no time. Also a one-on-one with our professional mentors is very much available. Ask questions and take a step forward into becoming financially free.
Quick Note: Scalpers and Intraday traders can decide not to care too much about the in-depth of Fundamental Analysis. Swing traders and position traders are the ones that will be needing fundamental analysis the most. Because Intra day traders and scalpers get in and out of the market within minutes. Studying the fundamental principles behind whichever market they are trading seems contradicting, it’s important to know, but less important to use in making Trading decisions being a short term trader. The chart ( technical analysis ) is your primary tool, if you are that type of trader. You might want to check the economic calendar for possible effective news that could go against your positions in the live market.
CONCLUSION
The forex market is determined by financial elements that influence the worth and strength of a country's currency . The monetary viewpoint for a nation has the most effect on the worth of its currency. Knowing the variables and markers to watch will assist you with keeping pace in the competitive world of forex.
Inclusion of fundamental analysis to your trading system will increase your results positively.
“Risks come from not knowing what your doing”
- Warren Buffett
Always be willing to put in time and effort into learning to be a good trader before you call yourself one. Successful traders have been there, done that. You can achieve consistency too.
Always remember that GIT (Global Institute Of Trading) is here to help you achieve success in trading. We are going to be bringing more amazing topics for you in the future. Some specific Economic Factors That Affect the Forex Market will definitely be discussed moving forward. Stay tuned.
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