This article will discuss the general understanding of fundamental analysis that can be applied to understand forex trading and stock trading. Currency trading transactions are inseparable from your expertise in analyzing the fundamental conditions of a country. This method is a series of observations called fundamental analysis. In this article, we will discuss the general understanding of fundamental analysis that can be applied to forex trading.

Fundamental analysis is an analysis based on global or local economic, political and security situations and conditions that differ depending on the country of origin of the stock exchange, companies that issue shares, or countries whose currencies are traded. This information will be a factor that will affect fluctuations in the exchange rate of a currency or not. The following are the principles of fundamental analysis:

  • Chain Reaction: The greater the impact of information, the chain effect will be on forex.
  • Information Distance: The closer information is to a currency, the greater the influence of the information.
  • News Sources: The more official and popular the news source is, the stronger its influence on the value of a currency is.
  • Type of News: Economic news has a stronger influence on a country's currency than other news, such as political, social or cultural.

All information regarding the economy or politics of a country can be used as a measure of the movement of a currency. Therefore, fundamental analysis is very closely related to news. In essence, this information and data will influence a country's forex supply and demand. In carrying out the fundamental analysis method, a willingness is needed to always find out about a country's economic news. This could be through the official news on a trusted site, through the statistical center of a country or a certain ministry depending on the data.

The advantages and disadvantages of fundamental analysis are as follows:

When viewed in terms of its function, the advantages of fundamental analysis are as follows:

  • Can determine prices globally.
  • In certain cases, fundamental analysis is effective for short-term trading.
  • Fundamental conditions are determinants of long-term price trends.

In addition, there are also some deficiencies in fundamental analysis, which are as follows:

  • Cannot determine position quickly.
  • Takes a lot of time.
  • Subjective, too many estimates and sources are used.

Apart from this, every trader needs to understand fundamental analysis, so as not to buy the wrong asset whose fundamental value is too bad or the price is too expensive. In addition, fundamental analysis is also needed by traders who are looking for assets at low prices to sell at high prices at a later date.

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