Fundamental analysis of the market. Technical and fundamental analysis

Fundamental analysis is a set of methods that allow to predict events in the market or in its segments under the influence of external factors and events. Precise prediction of changes in the market situation allows the player to make the right decisions in order to maximize the benefits of such fluctuations. Fluctuations caused by events influencing politics and economics at the macro level are being studied by fundamental analysis.

A successful player in the currency and stock markets, as a rule, conducts a deep technical and fundamental analysis of the macroeconomic indicators affecting their development. The deeper the study of the fundamental components of the market, the less the risks of participants. The main applied task of analysis is to determine the most attractive areas of investment.

news

Influencing the market news can be divided into:

• Economic;
• Political;
• Rumors and expectations;
• Force Majeure.

In turn, economic and political news can be divided into expected and unexpected events. To the expected include the announced news, which is entered in the economic calendar.

Validity

The impact of news and events on the market may have a different time period, but for any news the market reacts almost instantly, reviewing the price ratios, and in the future, the events that have occurred can only support the current trends. Therefore, market speculation on the news is possible only in a short time period, until the market again finds a sustainable position.

Economic calendar

Given the fact that most of the economic news has a well-known exit date, traders in the markets reduce them to a special calendar. He introduces an element of order into a chaotic, inherently market, allows you to prepare for the event and give it a preliminary assessment. In the economic calendar, dates are entered:

• Publication of statistical reporting by states;
• Financial statements of the largest players in the market;
• The coming into force of the adopted laws that change the conditions for doing business;
• Speeches of leaders of states, heads of national banks and large financial organizations;
• Other announced events that may affect the market situation.

Initial conditions for the analysis

A simple fundamental analysis of the market can in the first approximation in a short time frame proceed from the assumption that in the absence of news the market is stable and its general trends persist. Therefore, the main factors that affect the occurrence of fluctuations and, accordingly, the receipt of speculative profits from these fluctuations, are news (events). In this case, the more unexpected the news and the event, the greater the fluctuation of the market they can cause. Every businessman, conducting a fundamental analysis of the market, wishes to avoid risks and losses and is interested in additional profit from fluctuations.

Economic forces

In order to conduct a fundamental analysis, study factors that indicate the general state of the economy, such as:

• Trends of GDP change - with the growth of GDP, the national currency and assets on the territory of the state are becoming stronger;
• The country's budget, the planned and actual size of its surplus or deficit;
• Payment and trade balances, the ratio of exports to imports;
• Indices of consumer and wholesale prices, the magnitude of inflation;
• Data on unemployment;
• Indices of industrial production and exchange shares, other indicators of the state of the economy.

There are dozens of different indices and indicators of the state of macroeconomics. For players in the market, all signals submitted by changing these indices carry important information, having studied which, it is possible to correctly determine the strategy of their behavior in order to avoid losses and profit.

Economic news, as a rule, expected - analysts even before their appearance try to predict the values of indices and indicators. Only in case of a strong deviation of the actual values from the forecasts does the market experience significant changes.

Political factors

Government change, election results, state leaders' statements, adoption of laws and other political news are considered by fundamental analysis from the point of view of influence on the economy and predict market changes caused by these events. Conclusions of interstate agreements, non-market regulation of the economy can have a significant impact on the overall economic climate in the state and in countries that are its main strategic partners.

Political news include strikes, armed conflicts, changes in the political system, and other events. Their impact on the economy can have different consequences. Although, as a rule, major political shocks alert investors and lead to negative results for the economy as a whole. The political crisis is usually accompanied by an economic downturn and vice versa.

Rumors affecting expectations

Significant impact on the market players may have spread rumors. It is the expectations of people seeking maximum profits that can increase investment in a particular industry or a particular company. At the same time, such expectations lead to a change in the structure of the market. The risks of participants playing on the rumors are very high, but if the rates were correct, then the profit on such investments is great.

Force Majeure

Major natural disasters, which led to the destruction of industrial enterprises, roads and other infrastructure, are subject to changes in the economic situation in the disaster region. Technogenic catastrophes can change the investment climate of an individual company and the industry as a whole. Fundamental analysis allows you to determine the trends of economic changes under the influence of such unexpected factors. It is used not only to study the market as a whole, but also for specific investment directions. You can analyze the situation at the enterprise, in the industry, a certain segment of the market. The most developed applied directions are those that will be considered below.

Fundamental analysis of the foreign exchange market

News and events occurring in the economy, often significantly affect the national currencies. Studying the influence of events, a fundamental analysis of the currency The market Aims to predict the strengthening or weakening of national currencies in trading pairs. If the same news has a positive effect on the first currency of the pair and the negative one on the second, then obviously the strengthening of the first currency in relation to the second. An important factor in the foreign exchange market is the size of discount rates of national banks, especially economically strong states.

The fundamental analysis of financial markets and changes in exchange rates reflects the numerous processes taking place in the world economy and allows forecasting the movement of prices to achieve maximum profits in the ever-changing world of trade. It is important to take into account the cyclical nature of the economy.

In periods of recession, when production is curtailed, interest rates are falling, consumer demand is decreasing, unemployment is increasing, the national currency is losing its appeal. Investors of the foreign exchange market will try to keep their savings in a more stable currency. But it must be remembered that periods of recession are replaced by stagnation and growth, then the players of the foreign exchange market get their profits.

Fundamental analysis of the currency market in the short-term situation and the forecast of its development uses elements of technical analysis. The flat (stagnant) state is not interesting for players of currency exchanges. Fundamental-technical analysis is based on the use of mathematical modeling tools. For him methods of mathematical data processing and their approximations are involved.

Fundamental analysis of the stock market

Trading in shares, as well as other securities, requires in-depth study. The fundamental analysis of the securities market is based on the same signals as the entire economy. However, in this case, an important role is played by industry characteristics, since for many industries the same signals can have a multidirectional effect.

Fundamental analysis of the stock market requires a deep understanding of the phenomena occurring, both at the macro and micro levels. So, for example, the difficulties encountered in the sale of specific goods can lead to an increase in the sale of goods that replace them, shift the focus of investors in the stock market.

Fundamental analysis of shares Enterprises is based on a deep study of the state of the current economic situation, the prospects for the development of the industry. He must take into account the financial condition of the enterprise, its balance of payments, personnel potential.

A fundamental analysis of securities requires the highest qualification from the trader, an intuitive sense of market change. Having studied these factors, investors make decisions on the acquisition or sale of the company's shares on the stock markets. Only a fundamental analysis of the stock Market allows you to count on making the right decisions to the investor for profit.

Intermarket Analysis

An important condition for correct analytical conclusions is the understanding of the close interconnection of different markets and their segments. Tendencies that have arisen in any market or in its segment, certainly lead to a general fluctuation. The magnitude of such fluctuations is related to the importance and integration of this part of the market into the overall processes of the economy.

However, private and general trends may not coincide - growth in one sector of the economy may lead to a decline in other sectors and negatively affect the economy as a whole. For example, the fall in energy prices does not unambiguously affect certain sectors of the economy and the economies of states.

In this situation, despite the decline in energy-producing industries and industries associated with their provision, there may be an increase in the consumers of this resource. And only if the share of energy production in the economy of the state is high, this can lead to significant difficulties in the overall situation in the country's markets, causing a decline in consumer demand and solvency at all levels. Thus, the same events in different sectors of the market can lead to far from unambiguous consequences.

Complexities of analysis

Fundamental analysis is based on events that affect economic processes, but when analyzing the market, one must fully realize the fact that market prices are created by all participants, and their formation is subject to a lot of subjective factors, which can be quite unexpected from the standpoint of analysis standards. After all, each player on the market individually evaluates the incoming news, and only a set of decisions of all players finally form a balance of supply and demand and, accordingly, the price.

All market participants before the event on the basis of rumors, their experience, expert opinion are preparing to change and in accordance with their expectations in advance change quotes. On the same news, individual players react differently, sometimes taking opposite decisions - this leads to the fact that even very significant news sometimes does not cause significant changes in quotes and prices. Such an analysis is very laborious, as it is obliged to take into account the reaction of all market players to the news that has come out. We can assume that fundamental analysis is a discipline that studies the collective consciousness of market players.

Correct evaluation of signals

Stock indices and indices of indicators of the state of the economy are of an integrated nature and reflect only general trends of the economy and the market. For detailed analysis and decision making, you need to study all the circumstances that can influence the results. It's not for nothing that people who profit from transactions on the stock exchange are called players, because ultimately in their work (and maybe even in the art of exchange trades) a considerable role is played by luck, talent and the ability to properly assess those market signals that study fundamental analysis.