SINGAPORE -- (Marketwire) -- Whatever type of trader you are, it's crucial to gain as wide and accurate a picture as possible before opening a position in your chosen market.
Where technical analysis looks at price movement and patterns in the charts, fundamental analysts aim to ascertain the overall value of a market by looking at the surrounding factors.
This article aims to give you a 60-second brief on the basics of fundamental analysis.
Fundamental analysts pay close attention to news briefings, economic data and earnings reports, as these types of information help them to determine the value of a particular market. Typically, they'll want to know how much a company earns, whether it's in debt, its dividend structure and profit forecasts.
In order to determine the true value of a market and to better understand the potential movement of its price, fundamental analysts hold earnings in important regard.
If a company earns more than it originally projected, its market price is likely to rise. Once these earnings figures are released to the public, positions can be opened to take advantage of any uptrend that emerges. Higher earnings figures mean a higher intrinsic value of a market which is of interest to fundamental investors.
The health of a nation's economy is crucial to fundamental analysts, particularly for those trading foreign exchange.
If a country announces higher than expected unemployment figures, market prices typically take a tumble. If a Government announces measures that may affect GDP, spending, interest rates or other economic factors, prices may also make big moves.
Fundamental analysts keep thoroughly up to date with broader global commercial events, and often use them in conjunction with basic technical analysis to ensure they're opening the right positions.
Unfortunately, there are times when the market moves against us. Never invest more than you can afford to lose, employ tight risk management and never let your emotions get the better of you when trading CFDs or forex.
CFDs and margined Forex contracts are leveraged products and may result in losses exceeding your initial outlay.