Understanding Forex - #3 - Fundamental Analysis
This is a series of articles on the foreign exchange market. You will learn here what Forex is, how it works and how profitable it can be. The entire series contains the following articles. . .
- What is Forex?
- Technical analysis
- Fundamental analysis
- Money management
- Compound interest
Fundamental analysis.
Forex fundamental analysis strategies consist of studying the economic factors of a country to predict the future value of its currency. This includes, but is not limited to: economic conditions, monetary policy, etc.
Fundamental analysis focuses on studying the economic, social and political factors that drive supply and demand. Some important indicators are interest rates, inflation and unemployment. Political decisions are also important.
Below are some of the most important fundamental analysis indicators and their definition. You can learn more about these indicators and how they are used at www.investopedia.com.
Producer Price Index - PPI
A family of indices that measures the average change in sales prices received by national producers of goods and services over time. The PPI measures the price change from the seller's point of view.
Consumer Price Index - CPI
A measure of the price changes of consumer goods and services such as gasoline, food and cars. Sometimes referred to as "primary inflation".
Gross Domestic Product - GDP
The monetary value of all finished products and services produced within a country's borders over a given period of time, although GDP is usually calculated on an annual basis. It includes all private and public consumption, government spending, investments and exports minus imports that occur within a defined territory.
It is important to pay attention to financial news when trading using a fundamental analysis trading system. You can find financial news on the following websites. . .
- www.bloomberg.com
- www.businessweek.com
- money.cnn.com
- www.economist.com
- news.ft.com/markets/currencies
- www.fxstreet.com
Fundamental analysis is very important as you can see, but it is also important to implement some other techniques in your trading strategies. You can learn about other aspects of Forex trading such as technical analysis and money management in my other articles on this series.