Fundamental analysis - a set of methods to predict events in the market or in the segments under the influence of external factors and events.Accurate prediction of changes in market conditions allows the player to make the right decisions in order to obtain the maximum benefit from such fluctuations.Vibrations caused by events that affect politics and the economy at the macro level, study the fundamental analysis.
successful players in the foreign exchange and stock markets, as a rule, carries out a deep technical and fundamental analysis of macroeconomic indicators that affect their development.The deeper study of the fundamental constituents of the market, the lower the risk of participants.The main application task analysis - to identify the most attractive investment destinations.
News
news affecting the market can be divided into:
- economic;
- policy;
- rumors and expectations;
- force majeure.
In turn, economic and political news can be divided into expected and unexpected events.The expected attribute announced the news, which are entered in the economic calendar.
Validity
impact of news and developments in the market may have a different time frame, but any news the market reacts almost instantly, reviewing the price ratios, and further the events can only support the current trends.Therefore, market speculation in the news is only possible in a short time span, while the market again will not find a stable position.
Economic Calendar
Given the fact that most of the economic news is known in advance the date of withdrawal, traders in the markets bring them together in a special calendar.It introduces an element of order in the chaotic inherently market enables to prepare for the event, and to give him a preliminary assessment.The economic calendar will wear date:
- publication of statistical reports by States;
- financial statements of the largest players in the market;
- entry into force of the adopted laws, changing business conditions;
- speeches by leaders of states, heads of national banks and major financial institutions;
- other announced events that may affect the market situation.
initial conditions for the analysis
simple fundamental analysis of the market can be a first approximation, in a short time interval to assume that in the absence of news the market is stable and the general trends persist.Therefore, the main factors influencing the occurrence of vibrations and thus obtain speculative profits from these oscillations are news (events).At the same time the more unexpected news and events, the greater the market swings they cause.Every businessman conducting a fundamental analysis of the market, wants to avoid risks and losses and interest in additional profit from fluctuations.
Economic factors
In order to carry out fundamental analysis examines the factors that indicate the overall state of the economy, such as:
- trends of GDP - with GDP growth of the national currency and assets in the State strengthened;
- the country's budget, and projections size of its surplus or deficit;
- of payments and balance of trade, the ratio of exports to imports;
- indices of consumer and wholesale prices, the magnitude of inflation;
- unemployment data;
- indices of industrial production and the exchange of shares, other indicators of the economy.
There are dozens of different indices and indicators of macroeconomics.For players in the market all the signals given by the change of these indexes, carry important information, studying which can identify the right strategy for their behavior in order to avoid losses and make a profit.
Economic news are generally expected - analysts before they try to predict the appearance of the value of indexes and indicators.Only in the case of a strong deviation of the actual values from the predictions market is experiencing significant changes.
Political factors
change of government, the election results, the statements of heads of state, the adoption of laws and other political news fundamental analysis examines in terms of impact on the economy and predicts changes in the market caused by the events.The conclusions of international agreements, off-market regulation of the economy can have a significant impact on the overall economic climate in the state and in countries that are its main strategic partners.
The political news include strikes, armed conflicts, changes in the political system, and other events.Their impact on the economy may have different consequences.Although, as a rule, major political upheaval and attract investors wary of the negative results for the economy as a whole.The political crisis is usually accompanied by economic recession, and vice versa.
rumors affecting expectations
significant influence on market players may have disseminated rumors.It is people's expectations, seeking maximum profits can increase investments in this or that sector of the economy or a particular company.In addition, these expectations lead to a change in the market structure.Risks participants to play by ear, is very high, but if the bet were correct, then the profits of such investments is high.
Force Majeure
Major natural disasters that caused the destruction of industrial, communications and other infrastructure, are a change of the economic situation in the region of the disaster.Man-made disasters can change the investment climate in individual companies and the industry as a whole.Fundamental analysis to determine trends in the economy under the influence of unexpected factors.It applies not only to study the market in general, but also for the specific investment areas.You can analyze the situation in the company, in the industry, a certain segment of the market.The most developed areas of application are the ones that will be discussed below.
Fundamental analysis of the currency market
news and events taking place in the economy, often significantly affect the national currency.Studying the impact of events, fundamental analysis of currency market aims to predict the strengthening or weakening of national currencies in trade pairs.If the same news has a positive impact on the first currency pair and the negative - to the second, it is obvious strengthening of the first currency against the second.An important factor in the currency market are the values of interest rates of national banks, especially the economically powerful states.
Fundamental analysis of financial markets and changes in exchange rates reflect the numerous processes taking place in the global economy, and allows you to predict the movement of prices to maximize profits in the ever-changing world of trade.It is important to take into account the cyclical nature of economic development.
In times of recession, when production is minimized, falling interest rates, reduced consumer demand, rising unemployment, the national currency loses its appeal.Investors foreign exchange market will try to keep their savings in a more stable currency.But we must remember that recessions give way to stagnation and growth, it was then that the foreign exchange market players and get their profits.
Fundamental analysis of the currency market in the short-term situation and forecast of its development uses elements of technical analysis.To the flat (stagnant) state interested players to currency exchanges.Fundamental and technical analysis based on the use of mathematical modeling.For him involved methods of mathematical data processing and approximation.
Fundamental analysis of the stock market
Trade stocks and other securities requires a deep study.Fundamental analysis of the stock market based on the same signals as the entire economy.However, in this case, play an important role especially industry, because in many industries the same signals may have a different effect.
Fundamental analysis of the stock market requires a deep understanding of the phenomena, at both the macro and micro levels.For example, the difficulties for the marketing of specific products could lead to an increase in sales of goods, their replacement, shift the focus of investors in the stock market.
fundamental analysis of stocks enterprises based on the deep study of the state of the current economic situation, the development prospects of the industry.It must take into account the financial condition of the company, its balance of payments, human resources.
Fundamental analysis of securities requires the highest qualifications from the merchant, the intuitive feeling for market changes.After reviewing these factors, investors make decisions on the acquisition or sale of shares in the company on the stock markets.Only a fundamental analysis of the stock market can expect to make the right decision for the investor to make a profit.
Intermarket analysis
important condition for the correct analytical findings is understanding the close relationship of different markets and segments.Trends that have arisen in any market or its segment, will certainly result in an overall vibration.The magnitude of these oscillations is related to the importance and integration of this part of the market economy in general processes.
This private and general trends do not necessarily - the growth in one sector of the economy may lead to slowdown in other sectors, and have a negative impact on the economy as a whole.For example, the drop in energy prices is not clearly affects the individual sectors of the economy and the economy of nations.
In such a situation, despite the downturn in the energy producing industries, and industries related to their software, can chart the growth of the consumers of this resource.Only in the event that the share of energy production in the state's economy is large, it can lead to considerable difficulties in the general situation on the markets of the country, causing a decline in consumer demand and ability to pay at all levels.Thus, the same events in different sectors of the market may lead to consequences far from straightforward.
complexity of the analysis
Fundamental analysis is based on events that affect the economic process, but, analyzing the market, we must be fully aware of the fact that market prices provide all the participants, and their formation is subject to a variety of subjective factors that can be quite unexpectedin terms of standard analysis.After all, every player on the market individually evaluates this news, and a set of solutions to all the players finally creates a balance of supply and demand and therefore price.
All market participants before the occurrence of the event on the basis of rumors, their experience, opinions of experts are preparing for the change and in accordance with their expectations in advance change quotes.At the same news individual players respond differently taking sometimes conflicting solutions - this leads to the fact that even a very significant news sometimes does not cause significant changes in quotes and pricing.This analysis is very time consuming, as is obliged to take into account the reaction of all market players which appeared in the news.We can assume that the fundamental analysis - a discipline that studies the collective consciousness of the market players.
Correct evaluation signals
Stock indices and indices are indicators of the economy of the integrated nature and reflect only the general trends of the economy and market.For a detailed analysis and decision-making need to examine all the circumstances that may affect the results.No wonder the people who profit from the transactions on the stock exchange, called the players, because in the long run in their work (and maybe even in the art of trading) play a significant role luck, talent and the ability to correctly assess the market signals that studies the fundamental analysis.
