What is Fundamental Analysis?
Fundamental analysis is a type of analysis traders use to study and predict price movement. The objective of the fundamental and technical analysis is the same as the technical analysis which is to predict the future price movement.
A fundamental analyst uses economic and financial factors instead of technical indicators to forecast the future price movement of a Financial Market. It’s a comprehensive study and requires time and experience to master it.
The most common indicators used in the fundamental analysis are the GDP interest rates unemployment numbers factory orders consumer price index (CPI) and so forth. Each economic indicator has a measured effect on the market.
For example, if the US Federal Reserve decides to raise the interest rate the value of us dollar is likely to rise. Similarly better than expected employment would show signs of a stable economy and following that the stock prices may rise.
As a trader you should never ignore the fundamental analysis and combine it with technical analysis. The technical analysis will help you understand the price movement while the fundamental analysis will help you filter out the big moves that are caused by financial factors.