To negotiate on Forex and operate on the financial markets, it is necessary to have at least a general interest of concepts related to the economy. It’s true that to negotiate binary options you can simply follow the signals of special software, but if you want to optimize your business and earn more money, we recommend you deepen your knowledge of economic matters. In this portal we’ll won’t propose an entire university course in economics or finance, but we will give you seeds you will be free to plant to obtain good fruit. In this lesson we will discuss so-called economic indicators, the so-called fundamental ones. Have you ever heard of fundamental analysis? Here are some pointers.
What is fundamental analysis?
Although the name may inspire fear, we assure you that it’s really a fascinating subject. If you allow yourself to be overwhelmed (positively) by the dynamics of fundamental analysis, you will be able to find ever more passion for Forex trading.
So, let’s first see what it is.
Fundamental analysis, together with “technical” analysis (which we will discuss later on in this course), is the study aimed at designating the “right price” of a stock taking into consideration economic and financial aspects.
If fundamental analysis of stocks takes into account aspects such as capitalization, balance sheets and so on, in Forex it takes into account different factors such as macroeconomic factors that can have an impact on a given country or community associated with a specific currency.
Factors taken into account for fundamental analysis in Forex are visible in everyday life. They can be seen in the economy, in house prices, in consumer prices, in available or unavailable jobs. We can follow the news and get an idea on how the economy influences and manifests itself on our everyday lives, and how it is practically impossible not to follow it. And here we present another perspective: follow it to optimize your earnings. Not only newscasts, but also specialized newspapers such as Il Sole 24 Ore online or Bloomberg. These are just examples: you can use any sources you want, as long as they are reliable and constantly updated. News is essential in trading. The best results are obtained by taking advantage of the news and opening or closing positions accordingly. For example, if Draghi announces a cut in interest rates, this will certainly affect exchange rates with the EUR.
However, it isn’t only the large bodies that influence the choices for Forex, but also the individual states, such as the Jobs Act. Assessments regarding contractual conditions of workers affect savings and therefore consumption. The latter are fundamental for the macroeconomic well-being of a country, since they affect investment, employment, and GDP.
In addition to real facts, fundamental analysis can also be made of particular considerations, such as unofficial rumours. These hints, which can sometimes be simple forecasts, often influence the performance of securities and you can take them into consideration to make certain corrections.
In the next lesson we’ll look at factors taken into account in fundamental analysis.
Go to the next lesson – Fundamental Analysis