INTRODUCTION TO FUNDAMENTAL ANALYSIS

Fundamental analysis is the study of the influence of the price action (intrinsic value by examining related economic, financial and other qualitative and quantitative factors). There are 2 types of data used in Fundamental Analysis, which are Quantitative Data and Qualitative data

• Quantitative – capability of being measured or expressed in numerical terms.

• Qualitative – related to or based on the quality or character of something, which can be observed but not measured.

The main subject of fundamental analysis focuses on financial and economic theories, as well as political developments to determine forces of supply and demand.
Fundamental analysis is about knowing what is going on in a particular country in terms of its economy.

When applied to futures and forex, it focuses on the overall state of the economy, and considers factors including interest rates, production, earnings, employment, GDP, housing, manufacturing and management.

Fundamental analysis includes:

1. Economic analysis
2. Industry analysis
3. Company analysis

The ultimate goal of performing fundamental analysis is to produce a fair value that an investor can use to compare with the security’s current price, with the aim of figuring out what sort of position to take with that security (underpriced = buy, overpriced = sell or short).

Thapelo Mokomele