Fundamental analysis definition

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Fundamental analysis is a method of evaluating assets on the basis of external events and influences, as well as financial statements on the asset itself. It is used by traders to make decisions on different assets by measuring the economic, financial and market conditions that can affect its price.

Fundamental analysis is one of two major methods of asset analysis, with the other being technical analysis. While technical traders will derive all the information they need to trade from an asset’s charts, fundamental traders look at factors outside of the price movements of the asset itself.

Traders can either use fundamental or technical analysis exclusively, or a blend of the two.

Fundamental analysis involves using numerous qualitative and quantitative factors to evaluate an asset. For stocks, that can mean the figures in a company’s earnings report: revenue, EPS, projected growth or profit margins, for example. For forex traders, it can mean assessing the figures released by central banks that allow insight into the state of a country’s economy.

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Read more on technical and fundamental analysis here.

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