Fundamental Analysis
What is Fundamental Analysis in CFDs?
Fundamental analysis is a way of studying the bigger picture behind price movements in the market. Instead of looking at charts, it focuses on economic and political news, government policies, interest rates, inflation, and global events that affect currency values.
So, fundamental analysis in forex means checking the health of a country’s economy to understand whether its currency might rise or fall. Traders look at things like interest rates, inflation, employment data, and political stability. For example, if the U.S. economy shows strong growth, many traders may expect the US Dollar to get stronger against other currencies like Euro.
This approach is often called forex fundamental analysis or simply fundamental forex, and traders who use it are sometimes described as doing fundamental trading.
Types of Analysis
In trading, there are generally two main types of analysis:
- Fundamental Analysis – Focuses on economic data, news, and events (the “why” behind market moves).
- Technical Analysis – Focuses on charts, patterns, and indicators (the “how” prices move on a graph).
Many traders use both together for a complete view of the market.
Fundamental Analysis vs Technical Analysis
- Fundamental analysis in forex → Studies real-world factors like interest rates, GDP, and political events to predict long-term trends.
- Technical analysis → Studies price charts and patterns to predict short-term movements.
In simple terms: fundamentals explain why a market is moving, while technicals help decide when to enter or exit a trade.
Other Glossary Terms
F
- Forex
Forex, short for foreign exchange, is a global 24-hour marketplace where banks, businesses, and individuals buy and sell currencies, determining their relative values through continuous international trading.
- Floating Loss
Floating loss is the unrealized loss on an open trade that changes with market movement and becomes final only when the position is closed, reflecting potential current loss.
- Funded Account
A funded account is a trading account provided by a prop firm that lets skilled traders use the firm’s capital after proving risk management ability, allowing access to larger capital with limited personal risk.
- FOMC
The FOMC, or Federal Open Market Committee, is part of the U.S. Federal Reserve that sets interest rates and controls money supply to guide the U.S. and global economy.
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