undamental analysis is an older and traditional method. An action-reaction is a type of analysis in which a cause-effect mechanism is operated. It provides accurate predictions and positive results with comprehensive results in the Forex market. It is easier to detect market-related information than other methods. In this way, data can be easily accessed in a short time.
The information to be analyzed with the fundamental analysis method in the market is unlimited and will take a lot of time. It is a little more difficult to determine the relationships between the variables with the fundamental analysis method. Fundamental analysis is influenced by many economic and environmental factors. These factors cause the analyzes to gain a different dimension and you may have difficulties while analyzing due to the multiplicity of parameters.
How is Fundamental Analysis Done?
In order to do fundamental analysis in Forex, it is necessary to be able to follow the latest developments, current news and economic calendar about the currencies that concern a parity. Because in general, investors have some basic principles when investing in a currency or commodity. However, to specify the basic analysis methods that are generally accepted by all investors and experts, it is done in three stages.
1- Economic and Political Analysis: Analyzes such as the economic situation in the world, the shrinkage or growth of the national economy, how healthy the economy has grown and what kind of future will be determined by economic analysis. The analysis of the outside world should never be ignored while analyzing the Forex market.
2- Sector Analysis: There is a sector in which every company is in the market. Some firms may also exist in more than one industry. While making sector analysis, it is necessary to pay attention to internal and external interactions. Because companies can be affected by the interactions in the sector and the policies of the sector. For this reason, sector analysis is one of the most important parts of the fundamental analysis method.
3- Firm Analysis: It is the type of analysis in which the past and future financial situations of firms and companies are made according to the performance data of the company. It is necessary to examine and monitor companies in the market and sector. For this reason, company analysis is very important in fundamental analysis methods. In this method, methods such as horizontal analysis, vertical analysis, trend analysis, ratio analysis are also used while considering the size, location and partnership structure of the firm or company.