What is Fundamental Analysis?

Here is our video answering the question “what is fundamental analysis?”. Understanding fundamental analysis is a key factor for every trader’s success. Analysts typically study it to determine the overall state of economic factors and the strength of their influence on specific trading instruments to make investment decisions.

From fundamental analysis basics, we understand that it is a method of measuring a security’s value by evaluating related economic and financial factors. A fundamental analysis example is studying macroeconomic factors like the global Covid-19 pandemic and its effect on types of securities like Gold price or bond yields.

Another example is that economic factors like increased fiscal stimulus are usually supportive of Gold price. From fundamental analysis for beginners, an increase in monetary supply usually indicates a rise in inflation, which means Gold prices are expected to hike. Those expectations eventually increase demand which leads to a price boost.

For stocks, the fundamental analysis uses revenues, earnings, future growth, return on equity and other information usually from the quarterly earnings release, to determine a company’s underlying value and potential for future growth. For fundamental analysis forex, traders look at factors like inflation, rate hikes, fiscal stimulus to determine the long or short-term direction of a currency pair.

Watch the full video for our take on how to do fundamental analysis and a deeper insight into is fundamental analysis useful. Drop us a line in the comments with your thoughts on: is fundamental analysis dead? To be notified about the latest fundamental analysis vs technical analysis, subscribe to Capital.com, and click that notification bell.

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