Fundamental analysis

[Evgenia Gencheva]

Dynamic movements of large capital flows entering or leaving a short time cause a market disturbance to disturb the balance of payments, which require adjustments in exchange rates to restore balance payment. Speculative activities, volatility of commodity markets and short-term capital movements, cause volatility in exchange rates. The degree of change is a function of consumer demand. As far as financial markets are more adaptable than commodity to changing market conditions, the value of currencies is under the influence of short-term changes in capital and long-term commodity markets.

Financial factors are very relevant in the drafting of fundamental analysis, whether it comes to predictions of a particular exchange rate or changes in share prices on the stock exchange. Changes in financial and tax policies of the governments provoke reactions in the economy that affect the national currency and stock indices. Financial factors usually occur after economic. When the government began to intervene in various aspects of economic life or take on additional international responsibilities, financial factors may be given priority over economic ones.

For example, handling interest rates directly affect currency trading as it consists of simultaneous exchange of two currencies. The difference between interest rates appears as one of the most important market factors in Forex. Traders react not nominal changes in interest rates and the change in the interest rate differential in the respective currencies. exchange rate Should the countries of a currency pair at the same time changing the interest rate by the same amount in one direction, it would not have any bearing on the market. It should be noted that when the amendment is expected, it is calculated in the price in advance and when it fact can observe reverse action. In cases where it is usually obtained unexpectedly abrupt changes. When changes dictated more by political than by economic reasons, the market actively resist the actions of central banks, the latter may suffer significant losses.

Other factors that make complex commercial decision process are time difference between rumor and fact, the reasons for the change of interest rates and the prevailing view in the market for the correctness of change. In the event that interest rates change in non-market reasons, it is likely the market take account of their unrealistic levels and go against the decision of the central bank.

The fundamental and technical analysis using statistical methods for processing information concerning financial markets. But fundamental analysis looks at the market from the opposite side of the technical. Changes in the economy of the trading parties, political choices, actions of regulatory authorities, natural disasters, all influence exchange rates.
And if some of these events can not be foreseen, others appear planned / as the time of publication of economic news is scheduled for months ahead / or at least predictable. Therefore, if you draw a reasonable and timely forecasts, with their help can predict future movements in exchange rates and to obtain benefits.

Here we look at one particular aspect of fundamentals. Depending on the state of the economy, fundamental indicators can have different effects on the currency market. If the data shows no change, the reaction of forex traders can be ambiguous. If an economy is performing better or worse than the other, the currency will be bought or sold because it generates long-term trend.

Fundamental analysis insight into what can be seen on the graph when it appeared becomes the subject of technical analysis. Many Forex traders do not pay due attention to the foundation, thinking that the technical methods and automated systems are sufficient for successful trading. But sometimes a person gets into a zone of failure when it seems that he understood correctly, has the knowledge and skills in accordance with the best methods, but positions running at a loss after another. Then start looking for the cause to blame platform that is buggy, market maker in incorrect quotation justifies the concept that this business is a pyramid, etc.

In rare cases, a trader in such a state would seek the reasons in themselves and would have replied that this market to steal other people's money, because when someone wins another must lose. In this regard Alex Elder gives the example of an advertisement for recruiting mercenaries "You will be able to tour around the world to see wonderful places, meet interesting people and kill them," When we are on FOREX things sound something like "You to view the magnificent vast world of financial markets, meet interesting people and take their money. "

Where we buy and realize losses across someone selling because his plans were opposed. He has researched all aspects of the market better than us or know anything about the market that we are not learned in time. Does not it lies in its advantage? The ocean of information surrounding the forex trader is immense, it is an information object and instrument of commerce of modern foreign exchange market, or as they say "currency trader is information trader".