In the Forex market, there are basically two major forms of analysis used. These are fundamental and technical analysis. Fundamental analysis is mainly the intrinsic value of an investment. If you want to trade profitably, you need to know the role of fundamental analysis. Fundamental analysis is nothing but assessing the economic performance of a certain country. If you narrow it down, it can be analyzing the major news of a stock market or any other financial instrument. But to make things easier, the UK traders always focus on the core fundamental factors of the economy.
The fundamental analysis consists of Federal policy change, news and company earnings, these are the major pieces of fundamental analysis. The fundamental analysis refers to a country’s current or future economic observations, you can easily understand whether a country’s economic condition is strong or not by doing fundamental analysis.
The trade balance in fundamental analysis
You can measure the difference between imports and exports of goods and services by trade balance. If you want to know the overall economic strength of a country, you need to understand the trade balance by observing the chart and price movement of the market. Based on the trade balance data, you can easily make a profit by executing the trades on a short term basis. But for that, you must develop a simple trading method.
The trade balance of a country increases if they have more exports than imports, trade balance reflects the overall condition of a country’s economy. In the Forex market, the trade balance plays an important role which helps traders to execute their trades to win with a higher percentage.
Role of employment indicators
As a trader, you should always pay attention to the time the employment announcement occurs. This announcement is one of the most important steps to make profits since the market becomes extremely volatile and the announcement happens every month on the first Friday at around 8:30 am EST. Even pro traders at Saxo capital markets use the employment indicators to find the best possible trades. Though it will be hard for naïve traders, by reading some of the articles on fundamental analysis, you can easily learn this technique.
This is the time the unemployed get a chance to work as many new jobs are created and you can be paid for your work by the average hours worked per week or by average hourly earnings. The market can move to a great extent by the report of non-farm employment, this report plays a significant role in the huge movement of the market.
Pay attention to the interest rates
In Forex, the interest rate is considered as the main drivers of the price. If you want to stay in the long run then you need to understand all the indicators. The Federal Open Market Committee keeps their eyes open to all the above mentioned economic indicators.
The Fed has the power to use the tools at the disposal to lower, raise or to leave the interest rates unchanged by observing all the evidence about what has happened to the health of a country’s economy. The interest rates refer to be the main drivers in the market. However, it can only help when the traders observe the economic indicators or analyze the news data. Remember the fact that the interest rate decision plays a crucial in changing the price of certain assets.
The fundamental analysis basically looks on the economic news of a country. You should always focus on whether the news is way too high to move the market’s condition or not. As a trader, you should give importance to the overall market’s movement to make profits in the phase of the trend. Pro traders trade profitably because they always focus on the fundamental analysis as this helps to predict the market’s price movement in a precise way by analyzing the news events.