fundamental analysis

Fundamental analysis is a method of analysis that tries to predict future price movements based on analyzing key underlying economic indicators such as government policies, key economic factors and fiscal policies.

This information is open and readily available to anyone who wishes to scrutinize this. Making sense of this information though and using this to profit from a particular market takes more than just browsing information.

This is where fundamental analysts start to come into their own.

Fundamental analysis is a complicated beast. The range of economic indicators that affect any given country (and consequently the country's currency) are wide and diverse. Social, political and economic factors are both complicated and fluid. Things can change very quickly and these quick changes have an effect on the eventual outcome.

Fundamental analysis can be an effective method to predict economic conditions but given the broad nature of the information being analyzed, predicting exact market prices with fundamental analysis can be tricky.

Looking at a key economic indicator, such as the unemployment rate for example, gives you a fairly solid understanding of how an economy is going. How this translates into a currency's price movements though needs more than just the basic information.

Traders who use fundamental analysis typically create complex models based on past performance based on certain economic indicators. The idea is to model future performance based on the models of past performance.

Economic indicators are made up of a very wide and diverse range of figures and information. For forex traders, the fundamentals are those indicators that influence the economy of any particular country, and eventually it's currency.

These economic indicators are published at regular intervals throughout the year. Traders need to be keyed up as to when these indicators are due to be released and what the expected effect on any given economy and currency will be.

It's not so much knowing when a particular piece of economic news will be released. It's more about knowing what the effect of the new will be. For example, how will unemployment figures released in the UK effect the GBP and eventually the performance of the GBP against other currencies.

FXCC publishes an extensive economic calendar. This covers most geographic regions and gives an overview of how any one particular economic indicator is expected to impact the markets.

For forex traders looking for all upcoming indicators and news, the FXCC Economic Calendar should be the first stop on their search.