We’ve all heard about investing in the stock exchange market and trading in it and well, we must say that there is some good money in this business only if you are an active person and if you keep yourself updated about the situation of stocks all the time.
For a person who thinks that investing in stocks is where the struggle ends, he or she is totally wrong because that’s where the struggle actually begins. You need to keep an eye on the stock exchange market and you have to keep yourself on the track all the time. Now, today we aren’t here to talk about investing in this business, in fact, today we are here to talk about Fundamental analysis and how it is used in trading and investing in the stocks.
Fundamental analysis is basically a way to look at the stock market and analyze the social, economical and political forces which can actually put affect on the demand and supply or a particular asset. You see, it’s pretty simple to understand that at the end of the day it’s all about the demand and supply and this is the one main factor that actually determines the price/cost of an asset and in our case it’s all about the currency exchange rate.
The good part about fundamental analysis and fundamental trading is that it’s easier to indicate where the price would be headed looking at the supply and demand. However, the difficult part here is to analyze the different factors that affect the demand and supply. You have to keep your eyes open regarding the economy of different countries and states as that is exactly what will help you make some profit.
The main idea of fundamental analysis is that if the current and future economic state of a country seems good, it is but very obvious that it’s currency will strengthen up. Also, the more good the economy of a country will be, the more people will invest in it and hence you will have to purchase that currency in order to obtain those assets.
Who is Fundamental Analysis For?
Honestly, if you are a long term investor then we will suggest you to invest in fundamental analysis because it will benefit you a lot. You see, what actually happens is that the stock prices and valuation will ultimately reach parity and this parity is what will bring you the profit if you are willing to invest long and wait long. On the other hand if you are a swing investor then the benefit of fundamental analysis depends all and all on your holding period and your premises for the holding period. Lastly, if you an intra-day trader then honestly, you shouldn’t be in fundamental analysis because the events, rumors and different news can trigger the volatility and hence there can be huge price gaps and ups and downs in the post and pre market.
We hope that you are now clear about fundamental analysis and who is it for. So, again, if you are a long term investor then use this analysis to invest in stock market and you will see some real time benefits.