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There is no doubt that the supply and demand situation drives currencies and this day with the world wide web we have superior fundamental information and news than ever before – so why is it so hard to trade the fundamentals? Let’s take a look at why and how to use fundamentals correctly.

Markets Discount

Today news stories are acquirable in any corner of the globe in a split second at the click of a mouse – and this is the problem as well as the advantage!

The news is discounted in a split second and the markets are then looking to the future – by the time you have acted the news is taken into account.

In times gone by the fundamentals would take longer to spread and you had a window of opportunity to take advantage of them – this no longer exists.

Volatility

Has increased dramatically over the last few years and trading individual news stories is not an option anymore.

Take a look at non-farm payroll and check out the volatility – if you can trade that you’re a superior trader than me.

So can you trade the news at all?

The answer is yes and no.

We all know the long term fundamentals drive the longer term trends but this doesn’t help you time your entry.

1. Establishing the Longer Term Trends

You can keep the long term fundamentals in mind and use technical over purchased or over sold areas to time your market entry. This is effective for long term trend followers.

2. Spotting Contrary Trades

You can also use the fundamentals to catch huge profitable contrary trades.

It’s a known fact that markets currencies drop when the news is most bullish and rally when the fundamentals are most bearish. If a currency has extremely bearish news and fails to go lower or rallies than you might have an important turning point at hand.

The real problem with fundamentals is trying to work out what the participants think of them and how far they have been discounted and in our view you should keep these points in mind when trading:

1. Avoid trading short term news stories such as non-farm payroll and other economic realises.

2. Use long term fundamentals to establish the ideal trends.

3. Use market reaction to very bullish or bearish markets to look for contrary trades.

Trading the fundamentals is hard when you do so in isolation but as part of an overall forex trading strategy then can help you establish areas of value and also indicate the strength of longer term trends.

Fundamental Analysis is an important part of beginners stock trading research. While it can be less fun than technical analysis (charting), the value it brings is indispensible. Half of the challenge is knowing where to start. Fundamental analysis involves so many different aspects, it is simple to get lost. The goal is to evaluate as much information as you can regarding the company and its corresponding industry.

The general intent is to research various decimal aspects of the company. This includes revenue, profit, and debt. There are also more qualitative aspects to investigate, such as a company’s capability to compete with others in the industry. Putting these pieces together will give you the “big picture” of the company and its direction, in beginners stock trading.

Delving deeper into qualitative factors will be challenging, as there is no real way to assign a number to these values. It’s more of a “touchy-feely” process, when forming your views in beginners stock trading. A few of the most common factors are listed below:

Management – Who is involved? Have they been involved in other successes or failures in the past?

Business Model – What does the company do, and how does it make money?

Competitive Advantage – What, if anything, makes the company superior than its competitors? Patents? Advanced processes?

Market Share – Is the company’s market share growing or shrinking? How does it compare to its competitors’ market share?

Industry – Is the industry growing or shrinking in the current economy?

Looking at decimal factors is a bit easier, as apiece bourgeois should have a specific number or yes/no answer. The most important aspects in beginners stock trading are as follows:

Financial Statements – Are they audited by an independent auditor?

Balance Sheet – What are the company’s assets and liabilities valued at?

Income Statement – What are the company’s revenues, expenses, bottom line, and profits (if any)?

Loans – How much does the company owe? How soon will they be debt free?

Cash Flow – What is the company’s cash flow value?

Of all the fundamentals, the financial statements are the most important, in beginners stock trading. Knowing where the company stands, in regards to profit, assets, liabilities, and cash flow, is a must. Then the qualitative aspects should be researched. This should form an overall representation of the company. Is the company successful now? Will it be successful in the future? Is management making the right decisions and leading the company in the right direction? Once that research is complete, you can move on to technical analysis to determine the stock’s trend as well as your entries and exits.