Fundamental Analysis on Forex — Why You Need it

Ali Eccu
Ali Eccu
Aug 31, 2018 · 2 min read

Fundamental analysis is a study of the current world events in order to understand how they affect the economy. This can be anything — political events, environmental disasters, the level of employment, an increase in the birth rate, and so on. Such things have an influence on supply and demand, and, accordingly, the dynamics of the foreign exchange rate.

Trader needs to monitor world news constantly. Brokerage companies, such as GoCapitalFX, take this moment into account and publish important news on their websites.

The fundamental factors that determine dynamics of the market are divided into cycles:

  • short — usually lasts less than a day. These are events that occurred suddenly: catastrophes, terrorist attacks, earthquakes, and the like.
  • long — more planned and complex, such as elections, meetings of politics, military confrontations, volumes of resources, etc. These cycles last from several days to several years.

Big companies, like the same GoCapitalFX, usually have professional analysts in their teams who help traders with that.

For fundamental analysis, the following indicators are used:

  • growth / decrease in the interest rate — the conditions for obtaining loans by companies directly affect the efficiency of their work, hence, the profit;
  • the consumer price index — is used to calculate the level of inflation, on its basis the subsistence minimum is determined;
  • level of international trade — import / export;
  • supply and demand for basic goods.

The importance of fundamental analysis depends on the chosen trading style. Trading with a broker, for example GoCapitalFX, through the MT4 platform, most traders use short-term or medium-term strategies. In this case, technical analysis (when prices are predicted on the basis of trends that have developed over a certain period) is considered more effective. After all, you can not even have time to read the basic news reports, let alone to make any conclusions. For long-term strategies, the study of current factors can be decisive.

For successful trading it is extremely important to master the methods of market analysis. There is a huge amount of good literature on this topic, which should be read before you start working with real funds. Forex brokers, GoCapitalFX including, also provide educational articles, webinars.

To prepare for trading with real money, it is good to practice on a demo account first for a beginner. It can be opened in almost any brokerage company, in the aforementioned GoCapitalFX too.

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