Good point and a worthy clarification. But even this process with business values is not easy to perform, One is lucky if one can get such detailed and accurate comprehensive information from a company - and then try to place a value on commercial assets, machinery, patents, contracts, etc. But even if/when one can, that is still only half the story in that it only highlights a possible undervalued share price in static terms at the present moment in time. Investors in shares have the same motivation as forex traders (or any other traders) - that they only buy or sell when they believe the future price/value will be different than what it is right now.
For this reason, an undervalued share price might also be a dynamic indication of a perception that the company’s current value is falling due to, for example, aggressive competition, price wars, new legislation, etc and that the value will come to the price rather than price to the value. Speculation is always about where the value will be “tomorrow” compared with where it is “today”.
But I can also, at the risk of revealing my age, say that I really struggle nowadays to understand the value of a company in this traditional sense when I think of companies like Facebook, Rovio and Google. I have absolutely no sense of “value” regarding these types of businesses whatsoever!
So, yes, fundamental analysis is definitely a process than is beyond even being an art let alone a science
But one interesting consideration with trading is that most people wish to backtest their methods to prove their performance but I suspect very little such testing actually takes into account anything other that pure price movements - how can fundamental analysis be applied in that kind of testing?
Two major types of analyses are becoming popular among the forex trader: fundamental and technical analysis. Fundamental analysis helps a trader to determine the intrinsic value of a currency by analyzing various fundamentals like inflation, economic growth, interest rate, etc. of the nation whose currency we are trying to evaluate. However, with inappropriate trading knowledge and skills results of FA can’t b interpreted properly. Traders will require adequate knowledge and skills about forex trading.
@TradingBull666, I have not used it, I took a little $10.00 course on how to use it that was good with more examples than you can shake a stick at. But when I went to download the widget it was broke/not available. I receive a message from time to time to sign up but haven’t taken the time yet.
You can not neglect the fundamental analysis as many experienced traders always stick to the basics. I would recommend you stay as simple as possible as it is really difficult to analyse the market technically but if you have the grip on the basics then it will be easier for you to gain profits.
We are traders; we trade in a zero-sum game.
We can only win if the market has price action, up - down - sideways.
Fundamentals cause sentiment.
Sentiment causes momentum.
Momentum causes trends.
The technical’s report on past trends/patterns/cycles in the hope that we may gain insight into the future.
As traders, we are not, or I am not a long-term investor tieing up large sums of cash for drawdowns or potentially huge losses from stop losses.
The expression, “Trade what you see.” is trading Momentum. All the rest is fluff. A trade is planned, entered then its all about trade management and cash management.
