Those who participate in the Forex and equities market are either fundamentalists or technicians. These terms relate to what kind of market analysis principles they utilize. While the premise of these schools of thought is the same, the approaches to which they are used are not always similar between the financial markets. For instance, people who are into stocks and Forex trading who adhere to technical securities analysis both use charts to examine past price and volume movements when making price forecasts.
This is however not the case for fundamental analysis as the data that Forex and stock traders look into are not the same. Those in the equities market review balance sheets, cash flow statements, and income statement. In contrast, those who participate in the Forex market using fundamental analysis review economic reports to make price forecasts.
The goal of analyzing using fundamental principles in Forex trading is to predict the price of a particular currency and juxtaposing such against the same currency's existing price. Through fundamental analysis you will be able to make profitable trading decisions like when to take a short or long position. More succinctly, it allows you to buy low, sell high.
Analyzing using the fundamentalist school of thought enables you to figure out the inherent value of certain securities. When used in the currency market, this method of analysis involves studying the economic factors that have an effect on the value of a nation's currency. These factors are quantified by economic reports that are issued by the country itself or by private agencies at pre-determined times. These reports provide investors a means to gauge if the country's economy has improved or declined.
There are numerous economic reports that adherents to fundamental principles utilize. An example of which is Gross Domestic Product (GDP) which shows the total market price of all products manufactured or provided by the nation in a year. Although among the indicators it is the most used and talked about, it would be unwise to rely solely on GDP reports because it changes only after the overall economy has changed, and they are released only four times a year. CPI is a widely used indicator of inflation and it gives central banks the essential supporting data to increase interest rates, and therefore increase the demand for their currency.
To be successful in the currencies market, you have to take into account not only the economic factors but also sociopolitical factors that are just as potent determinants of the prices attached to the currencies being traded in the foreign exchange market.
This is however not the case for fundamental analysis as the data that Forex and stock traders look into are not the same. Those in the equities market review balance sheets, cash flow statements, and income statement. In contrast, those who participate in the Forex market using fundamental analysis review economic reports to make price forecasts.
The goal of analyzing using fundamental principles in Forex trading is to predict the price of a particular currency and juxtaposing such against the same currency's existing price. Through fundamental analysis you will be able to make profitable trading decisions like when to take a short or long position. More succinctly, it allows you to buy low, sell high.
Analyzing using the fundamentalist school of thought enables you to figure out the inherent value of certain securities. When used in the currency market, this method of analysis involves studying the economic factors that have an effect on the value of a nation's currency. These factors are quantified by economic reports that are issued by the country itself or by private agencies at pre-determined times. These reports provide investors a means to gauge if the country's economy has improved or declined.
There are numerous economic reports that adherents to fundamental principles utilize. An example of which is Gross Domestic Product (GDP) which shows the total market price of all products manufactured or provided by the nation in a year. Although among the indicators it is the most used and talked about, it would be unwise to rely solely on GDP reports because it changes only after the overall economy has changed, and they are released only four times a year. CPI is a widely used indicator of inflation and it gives central banks the essential supporting data to increase interest rates, and therefore increase the demand for their currency.
To be successful in the currencies market, you have to take into account not only the economic factors but also sociopolitical factors that are just as potent determinants of the prices attached to the currencies being traded in the foreign exchange market.
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To succeed in Forex trading you have to look at the socioeconomic and political factors that affect currency prices. One approach to analyzing the currency market is using fundamentalist securities analysis methods. Learn about this basic Forex concept by clicking here.
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