Fundamental analysis essential for trading on the stock exchange

For successful trading, it is usually necessary to use fundamental Forex analysis in addition to technical analysis.

No matter how much techies claim that technical analysis includes everything, the integrated use of both areas of Forex market analysis is still more effective.

The main advantage is that you know in advance where the price might go, rather than reacting belatedly to changes in the trading terminal. While technical analysis is based on market history, fundamental analysis allows you to see its future and be one of the first to enter the market.

Moreover, to trade on Forex, it is not at all necessary to conduct an in-depth study of the economic situation in the country and analyze the prospects for the next few months; it is quite sufficient to know the basics of fundamental analysis and correctly assess the impact of recent events on the exchange rate.

This is the simplest way to receive trading signals to open positions, so it is the best place to start when learning the basics of the forex market.

First of all, it should be taken into account that trading is conducted in currency pairs, which means that the price of the instrument will change depending on the role of the currency being analyzed.

Let's consider this point on such popular currency pairs as USD/JPY and GBP/USD - in the first case, the US dollar acts as the base currency, in the second, the quoted currency.

Therefore, when positive news regarding the US dollar is released, the price of the first currency pair will rise, and the second will fall, causing a downward trend.

Basic principles for fundamental analysis

The main sources for conducting fundamental analysis are regular news, it is their release that changes the direction of a trend or, conversely, strengthens an existing trend.

Therefore, to work effectively, you simply need to monitor news for your chosen currency. The easiest way to do this is directly in the trader's terminal. To do this, download and install the latest news indicator.

After installing the indicator, all you have to do is wait for new news to be released.

You can also get the necessary information from your broker's news feeds or on other financial websites.

A second trading option is to use a Forex calendar , which indicates the time of a future event. Even anticipation of news can shape a trend, especially if the expected news is known in advance.

What you should pay attention to.

Typically, a ton of news comes out during the day, but not all of it can influence exchange rates, so it's important to immediately identify the main ones, the publication of which will definitely influence the trend.

These include:

• Loud statements from politicians —for example, that the eurozone crisis is over or, conversely, that the euro is headed for collapse. Such statements almost always cause panic in the forex market and sharp fluctuations in the exchange rate.

• Natural disasters and other cataclysms hit the economy of the country in which they occur, and therefore cause a weakening of the national currency.

• Publication of economic and financial indicators – this is the publication of the values ​​of various indices and other important information related to the sphere of finance and economics. We will examine this aspect in more detail in other articles.

• Analysts’ forecasts – there are a number of analytical agencies whose forecasts carry enormous weight in the financial world; often their publication is enough to cause changes in the exchange rate.

The basics of fundamental analysis allow even a novice trader to make money on Forex. Successful trading requires creating a simple trading system whose key points are: news release, opening a trade, and exiting the market with a profit.

You can also try using analysts' forecasts if they have a strong influence on the trend, for example, everyone unanimously declares that Bitcoin will rise in price, and it begins to rise.

This moment can also be used to make money, but it should be taken into account that a trend caused by rumors and forecasts will not last long unless it finds more convincing confirmation.

A separate category is fundamental analysis, which is designed to determine the real value of shares, but this is another topic that we will discuss in future articles on our website.