The financial well-being of a currency trader depends on a whole complex of factors, the main of which, in our opinion, is its ability to adequately and comprehensively analyze the situation on the Forex market.
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In the circle of experienced players in this market, it is customary to distinguish between several main types of analysis, but we will dwell in more detail on one of them, namely, fundamental analysis. The latter is an in-depth study of the political and economic situation in countries whose national currencies are traded within the framework of the Forex trading platform. In the review of AvaTrade you will get the a decent idea for the same.
- It is not a secret to anyone that the position of political and economic affairs in a particular country has a direct impact on its financial sphere, in particular, the rate of the national monetary unit. In the event that the latter is traded on the Forex market, a comprehensive analysis of the life of the state or their group is of particular relevance to the trader. These are the functions that fundamental analysis is called upon to perform.
- Information concerning the economic development and political situation in the country is obtained by traders through the operational work of the world’s leading news agencies. The latter, in the first place, include “Bloomberg”, “Reuters”, “France Press” and others.
- After analyzing the data (finding out for themselves the degree of potential favor or harm to the exchange rate of the traded currency), the trader makes a decision regarding its purchase or sale. Actually, this is the main essence of fundamental analysis.
It should be noted that the information intended for processing in the framework of the fundamental analysis is usually divided into two large groups predictable and unpredictable factors.
The first group is news about the approximate time of publication of which the trader has an idea. Moreover, such data carry in them the effect of novelty only partly, since the trader has long been familiar with expert forecasts for them.
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As a rule, this kind of information concerns the macroeconomic indicators of a particular state or an entire region. The most common predicted factor can be attributed to inflation, business activity and unemployment, the budget deficit, the balance of payments, etc.
As for the unpredictable factors, they, as you have probably guessed, are unpredictable events, mainly in the political sphere. For example, we can talk about unplanned resignations in the higher echelons of power the president, the minister of economy or finance, the chairman of the Central Bank, and the like.
Unpredictable factors in fundamental analysis can also be natural disasters, military conflicts, terrorist attacks, etc.
Thus, these factors are the most real force majeure, the influence of which on the foreign exchange market of Forex is sometimes quite tangible (recall at least September 11, 2001). Consequently, the trader simply needs to take them into account when making currency transactions.
- A beginner trader may have a well-grounded question: how exactly can we keep track of everything happening in one or another of his countries of interest, not to mention the world?
- Everything is very simple! Today, most broker companies provide their clients with the opportunity to receive in real time a summary of the most important news from different parts of the world, which are vital for fundamental analysis.
Therefore, for a single trader, the question of an individual (manual) search for fragmented political and economic information is simply not worth it. The main thing is to be able to correctly assess the situation and make a timely decision regarding purchase or sale of foreign currency.