Fundamental analysis is the study of global economic news and indicators affect financial markets. It covers everything from a company’s profits for the year to interest rates. It can range from social change such as a growing middle class in China to essential monetary policy.
The most important thing to remember with fundamental analysis that it all the factors dealt with – interest rates for Forex, consumer demand for commodities and profits for stocks – are almost always already factored into the price when you trade.
For stock market traders and those trading individual indices like the FTSE and Dow Jones, people would look at companies’ profits as the main indicator in fundamental analysis. Other factors like the state of the industry or political support (eg tax breaks for certain sectors) could also play their part. Again GDP, inflatioon and interest rates can be of interest to the fundamental analyst here.
Many traders carry out fundamental analysis on the strengths and weaknesses of a particular market to assess whether it might appreciate (rise) or depreciate (fall) in the future.