How is fundamental analysis of the stock market carried out?
In order to consistently make money on securities, you should use fundamental analysis of the stock market.
Yes, many traders assure that technical methods of studying trends are no less effective, but I still prefer to use fundamental analysis on this exchange.
Unlike Forex, analysis here is more complex, since several sources of basic information are used.
The first is news, the second is company reporting, and the third is trends in the industry in which the selected company is located.
That is, in order to make a forecast for the stock price, one should take into account not only the financial state of affairs within the enterprise, but also how good the prospects are for the industry as a whole.
Stages of fundamental analysis of the stock market
In order for fundamental analysis of the stock market to have maximum efficiency, you should take into account the global trend and adjust the forecast taking into account current news:
As always, it is much easier to understand what we are talking about with specific examples.
Industry prospects – let’s take companies in the Internet industry; it is clear that due to the pandemic, this segment will only grow over the coming year.
That is, we can assume that the shares of all companies related to the sale of goods or the provision of services online are also prone to growth. Similarly, the prospects for energy, pharmacology, military industry or aircraft manufacturing can be assessed in the same way.
For example, if the number of air flights is decreasing, then it is unlikely that we should expect anything good for aircraft manufacturing companies. Enterprise reporting - data on revenue and profit received is always the key point that determines the value of a company's shares.
At the same time, such parameters as accounts payable and the real value of the security also play an important role here. The last point is especially important, since how undervalued or overvalued a security quite significantly affects the direction of the trend.
News – here information regarding the points described above is displayed.
That is, from the news you can get information about the prospects for the development of a certain industry and about the financial result with which the enterprise completed the reporting period. Also in the news are published reports about the conclusion of large contracts and the payment of dividends, scandals that could affect the reputation or financial condition of the enterprise are displayed:
In order for fundamental analysis of the stock market to have maximum efficiency, you should create a simple strategy .
In the process of implementing the created strategy:
- We choose a promising market segment that has good chances for growth.
- We find a company with undervalued securities and good financial condition.
- We are waiting for news that will serve as a signal for the beginning of growth and possibly a new strong trend and take off the deal after their release.
Similarly, you can use fundamental analysis of the stock market when opening sales transactions, only in this case all prerequisites must be negative.
You might be interested in learning the patterns of the stock market - http://time-forex.com/interes/zakonomernosti-fondovy-rynok