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Profit growth prospects of the market trading: fundamental analysis as a basic instrument
What is necessary to trade online? That’s right, such activity involves the analysis of the short-term perspective of a price movement and a recognition. You can get the target signals which will determine intended direction of a price movement with the highest possible quality through the use of technical analysis
But it is worth to mention that the technical analysis will not give a deep result. Actually the fundamental analysis is useful in this problem solving. It is the evaluation of the current economic situation influence at the local level (the company), or on a more global level (in the state). The first case involves shares operation, and the second case - currency operations based on the statistics.
The more effective a country or a company develops, then higher their investment prospects. This is so because the share price is growing along with the development (for companies), and the currency is strengthening (for the state).
This leads to a clearly understandable and regular connection: The target state economy develops => currency strengthens due to the investment market improvement, the company's profits grow => the company's share price is going up steadily
However, not only economic, but also a political component is affecting the investment background. For example, the power of state is changing to a more radical government that is extremely negative towards other States. The result is the investment climate problems.
Then, the companies stop work in a particular state, and the unemployment is rising. State problems are causing an increase in investors distrust making them to withdraw their capital and to invest in foreign currency.
The aggressive state policy also negatively affects the work of national companies. The rate of foreign investors’ distrust of the companies is growing up, the investments are sliding and as a result the company’s shares are falling that also contributes to the rising unemployment.
Fundamental analysis: how to assess the current economic situation in the country
The current state of the country's economy can be estimated by the dynamics of macroeconomic indicators in different sectors of the economy. These sectors are:
- public sector - a budget and a balance of interstate payments, as well as GDP;
- financial sector - the Central Bank's base rate and the lending;
- industry - the volumes of manufacture and a labour productivity
- employment - the unemployment rate, the number of jobs and the wages;
- inflation indicators;
- trade - retail and wholesale sales;
- business performance and consumer confidence indicators.
The above-mentioned indicators get counted regularly by the official resources and posted on the state official websites. External financial resources often collect this data and arrange it in the form of tables that is very convenient. These tables will be a big help for the traders.
Formed tables is known as an economic calendar. It allows to find out which indicators will be published on the day required by an investor or a trader, as well as to get this indicator’ average projected value from the several major analytical agencies.
An example of economic calendar is as follows:
29.04.2015 11 Am EST USA GDP in the first quarter 0,1% -> 0,2% -> __
Where 29.04.2015 11 Am EST - is a date and a local time of publication (usually you may indicate your local time zone);
USA is the country of the index to be published;
0,1% is the change of USA GDP in a previous quarter (4th quarter of 2014);
0,2% is the expected rate in the first quarter of 2015;
__ - is actual value of changes in GDP in the first quarter of 2015 that will be indicated in the calendar at the moment of its appearance on the official website.
Why the economic calendar should be used. It helps follow the main rule of the Exchange - “Buy the rumour, sell the fact”. The calendar use will provide the opportunity to find out certain rumor and present it as a fact, thereby causing a growth or fall. All the financial market big players are applying this rule.
This rule means that while expecting the country situation improving, the traders seek to buy a state currency cheap before it is not grown. This affects the investment climate growth.
