Steps You Should Consider For Fundamental Analysis of Stock Market Trading

By Ian C Jackson

No matter what it is you trade, your success in the stock market depends upon a thorough knowledge of how to analyse and then make a good judgement for placing a trade, or opening a position. This boils down to two methods for trading, one being an analysis of company performance, the other a study of charts and their price patterns; Fundamentals, and technical analysis, respectively.
On the other hand, the technical analyst will closely scrutinize the prices of a stock on his or her chart. Based on historical performance, a judgment is made on the impending direction of the stock price.
Fundamentals are the observations made of the economic climate of a country. It's a look at the grand scheme of things, if you will. The notion being that the strength, or weakness of a county's economy influences its currency in terms of supply and demand. This in turn influences the value of its currency.
By way of example, if a major upswing occurs in the US economy, it will be strengthened thus a rise in the dollar value can be expected and heavy investment will follow. The bullish mood will take traders and in a self-fulfilling prophecy, the dollar's value rises.
A very simple task, one might assume. But one shouldn't get too excited, as all is not as easy as it might at first appear. There are so many factors that come into play when factoring the economy of any country and traders so often make different interpretations at to what the economy is doing, and will do.
The technique of fundamental analysis looks at the economic indicators, searching for the signs suggesting strength of economy. These indicators include, unemployment, consumer price index, interest rates, GDP and so on.
These criteria are shown in analysis reports that are regularly released by government agencies, and non-government institutions. Note their release dates for yourself and take a few notes of their impact on prices over the period of a few months.
Be careful because numbers may not necessarily be what they appear to be. Their impact should be judged in accordance with other things too, such as forecasted criteria. Be cautious about their absolute value. Meaning that a rise in the interest rate may not be as significant if it's expected, than if it is not. The adverse scenario could heavily affect prices.
A word of warning. Fundamental analysis is fine in its own right, but be aware that it does only show the big picture. You need specific entry and exit points to be able to trade, and it does not offer that, so use it alongside technical analysis, or charting.
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