What is the difference between a fundamental analysis on the stock market and the FX? - Page 2
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Thread: What is the difference between a fundamental analysis on the stock market and the FX?

  1. #1
    Super Moderator Gulfstream's Avatar
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    What is the difference between a fundamental analysis on the stock market and the FX?

    There are many significant techniques that determine the direction of movement of currencies and assets.
    Undoubtedly, fundamental analysis is one with the highest priority.

    The value of fundamental analysis is often underestimated or misunderstood by beginning traders.
    A lot of people believe that this type of analysis is useful only to investors or traders with long-term positions. However, it is not like this. If you know the basics and concepts of fundamental analysis, you have an opportunity to find the dynamics of financial markets, which are very important for the development of the trader, regardless of the role of
    fundamental analysis in daily trading.
    The fundamental analysis will be divided into 2 segments of the financial market: the currency and the stock market.

    I will try to cover as much as possible in detail by answering the questions:
    - What is the fundamental analysis and how does it affect the priority of movement?
    - What are the features of the fundamental analysis of the currency and stock market?


    And also I will try to disclose the basic methods of fundamental analysis for stocks, bonds, CFDs and other assets, which are represented on the stock market, with a phased disclosure of the sub-topics:
    - What factors influence the movement of an asset and the stock market as a whole?
    - How to evaluate correctly published news and reports for companies, whose shares are traded on the exchange?
    - Where and from what sources it is possible to receive information about the impact on the movement of an asset?

    When you trade on FX market, you should know the answers to the 2 basic questions:
    - what news you should consider the most important of those published in the news line / economic calendar;
    - how you should read the news and determine their impact on the movement of currency pairs and tradable assets;
    - what economic and political factors you can consider as significant ones for work in the FX market.


    In the segment of the fx market, I will present an assessment of the following fundamental factors according to their degree of influence:
    - macroeconomic statistics of countries-issuers of a particular currency and the largest economies of the world;
    - the results of the meetings of the world's largest Central Banks;
    - Specific factors that affect individual currencies.


    On the stock market, the influence of key fundamental factors:
    - corporate reports of companies;
    - sectoral statistics and forecasts;
    - macroeconomic statistics, especially in the largest economies of the world;
    - meetings of the world's largest Central Banks.


    A distinctive feature of the fundamental analysis of the stock and currency market is that the stock market analysis is conducted on a specific company, its activities and profitability are studied, basing on the published reporting data and company news, etc., along with the economic and political situation in the country.


    During analyzes of the foreign exchange market, the movement of currency pairs is investigated and forecasted. Since there are two currencies of different countries in one pair, the influence of both factors is considered. So, in dollar currency pairs, in which the dollar is quoted, first of all, the economic statistics of the USA and the second presented currency are studied, it is revealed - what news will be the most important and can significantly affect the movement of the currency pair in one direction or another.


    Reviews of the use of fundamental analysis techniques, as well as specific options for market reaction
    on those or other events will be presented on real graphs and examples.


    What is the fundamental analysis and how does it affect the priority of movement?
    Fundamental analysis is represented by methods of assessing and forecasting the forthcoming movement of financial markets and its specific instruments. These methods are based on macroeconomic, financial, production, industry and other data relating to a particular market or instrument.
    In other words, fundamental analysis is engaged in assessing the situation from the point of view of political, economic and financial-credit policy. Information on the interest rates of central banks, the economic course of the government, possible changes in the political life of the country, as well as various kinds of rumours and expectations are important in fundamental analysis.


    In practice to conduct fundamental analysis is not so simple. The same factors may have different market value in different conditions or may become decisive from insignificant ones.


    Thus, the success of a trader in conducting a fundamental analysis depends on an understanding of the laws of the financial market, the ability to compare absolutely unrelated events at first glance. Also, a fundamental analysis assumes knowledge of the general picture, specified by the published news only.
    The fundamental analysis allows us to assess the factors, that can affect the movement of exchange rates over a period of several days to several weeks.


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  2. #11
    Super Moderator Gulfstream's Avatar
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    Fundamental data of currency pairs

    For other currency pairs, published statistics on the United States are also important, because namely in this country biggest part of capital investment, material and non-material resources is accumulated, and economic state of US influences the other currencies course of movement, along with other economic indicators of country.

    For example, for a GBPUSD pair, important indicators for determining the direction of traffic will be publications of the following nature:
    - minutes of the meeting of the Bank of England's Financial Policy Committee (it provides a comprehensive analysis of financial conditions and decisions on maintaining financial stability);
    - GDP (the overall indicator of economic activity is a key indicator of the health of the economy, quarterly dynamics of GDP percent shows the growth rate of the economy as a whole);

    - manufacturing PMI of the UK (measures the level of activity of purchasing managers in the industrial sector. Any values above 50 indicate an expansion of production, while values below 50 indicate a reduction);
    - the index of business activity in the services sector (measures the level of activity of purchasing managers in the services sector. Any values above 50 indicate expansion, while values below 50 indicate a reduction);
    - Speech of the British Prime Minister - May (speech has influence on statements about the future of Great Britain in connection with the transition period - withdrawal of country from the European Union);

    - The volume of production in the manufacturing industry in the UK (measures the change in total production in the UK, which gives us a good indicator of strength in the industrial sector.) The manufacturing industry accounts for about 80% of the total industrial output .Indicators, which are higher than it was expected, are reviewed as positive / “bullish market” in the GBP, and indicators lower than it was expected, indicate a negative / “bearish” for GBP);
    - consumer price index (measures change from the point of view of the consumer - this is the key way to measure changes in purchase and inflation trends in the UK)
    - The unemployment rate (determines the percentage of the total workforce that is unemployed but is actively seeking work and is ready to work in the UK in the last 3 months.) A high percentage indicates weakness in the labor market .The low percentage is a positive indicator for the labor market in the UK and follows to be perceived as a positive / “bullish” factor for GBP).
    In connection with the withdrawal of the UK from the European Union (based on the results of a recent referendum), economic data published by the Eurozone is no longer a driver for determining the direction for this pair.

    For example, let's take another currency pair - NZDUSD, whose fundamental analysis takes into account the indicators of both the US and New Zealand in proportional amount. A distinctive feature of this pair is that the nature of the movement can be determined basing on the publication of data on Australia, since the countries, firstly, are on the same continent, and secondly, both are raw materials producers. And that`s why the movement of the pair NZDUSD and AUDUSD in many respects are similar and unidirectional.
    The examples below show the movement of NZDUSD and AUDUSD currency pairs on a weekly timeframe:
    Attached Images Attached Images

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  3. #12
    Super Moderator Gulfstream's Avatar
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    In conclusion, I will summarize the main similarities and differences in the process of conducting of fundamental analysis in the stock and currency markets.


    The similarity of FA is that on both markets it is necessary to study the published statistical and economic data very carefully, where they are presented and considered it in the context of the economic situation of the country and the world economy as a whole.


    The difference is following: when analysis is conducted in the stock market, the analysis is conducted on a specific company and for it are studied its activities, its profitability, which is based on the published reports and news of the company in thee industry, where it is presented, which are combined with the economic and political situation in the country. In the stock market, the greatest influence is placed on the publication of the financial statements of an individual company, which can largely affect the movement of an asset.




    During the process of analyzing the foreign exchange market, the movement of currency pairs is investigated and forecasted. Since there are two currencies in the pair, the influence of the factors of both countries is considered. So, in dollar currency pairs, in which the dollar is quoted, mainly economic statistics of the USA and of the second presented currency are studied, it is revealed - what news will be the most important and can significantly affect the movement of the currency pair in one direction or another.
    It turns out that under the FA of the foreign exchange market we take into account three factors: the impact of the economy of the two countries on the quotation and the general world economic situation as a whole. And, when you publish data on any currency pair in one time interval or day, you need to compare the importance of data and assess, which of them can most significantly affect the behavior of the pair.


    In whatever market you will conduct a fundamental analysis - stock or currency - the most important would be a competent interpretation of the published data and basing on them forecasting of future behavior of the price of the asset or currency pair.


    Wish you all successful predictions!

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  4. #13
    Rookie ola4real's Avatar
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    If there is going to be difference on the impact of news on forex field and stocks, that difference can not be much. We should take note that forex moves in pairs, while the stocks are single entities, and in a situation that news was out for USD, the US stocks will rise when the news is in favour of USD. But currency pairs like EURUSD will fall when it is in favour of USD.

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    Rookie Silhouette's Avatar
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    This knowledge is too deep for me and I don't really know much about how stock market really works because I've been spending my couple years only studying to learn and focus on forex market without taking any other business along the way. Maybe fundamental analysis on stock market has better impact than forex market because stock involves big companies which easily dragged by issues and not really paying attention to economy growth.

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  6. #15
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    I recently started picking interest in trading the stock market but whenever I look at the stock market, the gaps and all that don't actually help me know how to handle the market and then make analysis. I think one most incredible thing that would make me stick to forex trading market is that it is more volatile, therefore we can have better chances of making good analysis and being profitable.

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  7. #16
    Rookie layigold's Avatar
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    Fundamental analysis deals with economic news and its effect on the financial market . Financial market is not limited to forex alone though forex happens to be the largest financial market in the world . The effect of economic news on stock will only affect the the stocks that have correlations with such news but that is not so in forex , other currency pairs that are not connected with the news might be impacted upon

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  8. #17
    Rookie Azis Muslim's Avatar
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    Stock market will be affected by fundamental analysis as well as Forex market because fundamental may include many things that related to one Nation's economy. When there are issues in politics, financial, home sales, unemployment, both stock and Forex market will get the impact to each movements and volatility because investors who sees the issues will try to analyze the outcome if that problems can not be solved yet.

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  9. #18
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    The stock market is more affected by the fundamental analysis than the forex business, here is why I think so, we know that forex is a broad business where there are many participating people worldwide, that is not same with the stock exchange market where it is localized, hence even anything happens in the country like a political statement that is not favorable, the impact will be more for the stock market.

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  10. #19
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    i do not know much about stocks but i think their people are investing for long term we can say that is also low risky and slow as well from my knowledge otherwise i do not have check so it can be opposite but from old stock exchange concept it seems where people buy shares and save for months

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    Rookie Yayami's Avatar
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    Quote Originally Posted by Ehis View Post
    The stock market is more affected by the fundamental analysis than the forex business, here is why I think so, we know that forex is a broad business where there are many participating people worldwide, that is not same with the stock exchange market where it is localized, hence even anything happens in the country like a political statement that is not favorable, the impact will be more for the stock market.
    thank goodness my focus always be with forex market because i can put my technical analysis in use with forex market rather than taking any participation to trade the stock market and force me to understand how to do things in fundamental. i only understand few things about fundamental so i've made a solid decision for long time ago that i don't want to go to stock markets but going towards the forex market instead.

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