Fundamental Analysis Intro

You have now reached the 4th lesson in this free Forex course. This lesson willbriefly introduce you to fundamental analysis. Fundamental analysis is the mostdifficult aspect of Forex interpretation. It requires an extended period of learningfundamental concepts and their impact on the Forex market.T o learn a fundamental style of trading completely would require years ofexperience. So how can you take advantage of fundamental concepts withouthaving those years of experience? The Forexezine provides the answer. Youwill receive articles that explain different fundamental market concepts - oneconcept at a time.Over time you will have an increasing arsenal of fundamental concepts to add toyour technical trading skills. Tips on how to compare fundamental results withtechnical signals will be given in the "Forex Fundamentals" issues of theForexezine.So what does fundamental analysis do? Fundamental analysis uses "economicindicators" and other news related information to determine an impact on Forexprices. These "economic indicators” are published at regular intervals and manyof the International Banks use this data to forecast Forex trends. The economicindicators measure how well an economy of a country is doing. This data canthen be used to compare the economy of one country with another. The status ofan economy will influence its exchange rate, so fundamental analysis provides uswith ways to measure potential Forex trends.When this data is made available to the public there is a reaction from investorsand speculators. Information in the form of news and economic indicators isvaguer than that of technical indicators. There is a lot of gray area in this type ofAnalysis. The market will ultimately react to how people think the economic datacompares to the current market situation.Economic indicators usually reveal information that "Should cause a currency togo up in price" or "May cause a currency to go down". The words 'should' & 'may'in the quotes above reveal the ambiguity of the fundamental data.Here is an example of what analyzing fundamental data is like. Let's supposethere are six economic indicators (there are a lot more). Let's call our sixindicators A, B, C, D, E, & F. Now we wait for the data from our indicators to bepublished in a financial magazine or at an online source. We manage to get thereadings for our economic data for the EURO:Indicator A: is in a range where the Euro may go upIndicator B: is in a range where the Euro should go upIndicator C: is in a range where the Euro could go downIndicator D: is in a range where the Euro usually goes downIndicator E: is in a range where the Euro could go upIndicator F: is in a range where the Euro may go downBy looking at the above indicators, you don't know what the Euro is going to do.Furthermore, currencies are always traded in pairs (explained in more detail inlesson #5). You would have to get the fundamental data for another currency pair and compare it with the EURO to make a trading decision. I think you canappreciate that this is no simple task.I do not want to discourage you away from fundamental data. The best way tolearn is one piece at a time. Eventually you will build a puzzle from all of thefundamental and technical data and make more informed trading decisions.At this point I am going to list some of the most commonly used fundamentalindicators (sometimes referred to as economic indicators).1. The Gross National Product (GNP). This number represents the total financialposition of an entire country. This is probably the most referred to economicindicator (although by itself it does not provide enough info to make decisions).2. The Gross Domestic Product (GDP). Basically this is the GNP for the UnitedStates. This measure is still referenced, but is almost completely phased out ofuse. The term GNP has been used to represent GDP as well.3. Consumer Price Index (CPI). Measures retail prices in a country.4. Producer Price Index (PPI). Similar to the CPI, but for wholesale prices.5. GNP & GDP Deflator. Readjusts the GNP & GDP for inflation.6. Industrial Production (does not have an acronym).7. Capacity Utilization8. Unemployment rates also have an impact on foreign currency exchange rates.9. Personal Income has an impact on foreign currency exchange rates.10. Consumer Spending Indicators also influence Forex prices.These are just a handful of economic indicators used in fundamental analysis.Throughout the course of the Forexezine you will be able to interpret theseindicators.If you do not like the concept of fundamental analysis, you can certainly skip italtogether. There are plenty of purely technical systems out there for you to tradewith (like at 4xtrend). A key concept to technical analysis is that all of thefundamental data is ultimately revealed in the price anyway. And if you have asystem that must be triggered when the price goes up or down, then you have agreat tool.The fundamental analysis issues of the Forexezine are purely for those peoplewho are interested in them. I will tailor the frequency of topics to the reader’spreference.I always encourage you to drop me a line with any questions, suggestions fornew articles, articles you have written, or just ideas related to the Forex. Please wait until after the next lesson to ask any questions about the Insider Secrets ofOnline Currency Trading course. I still have some more concepts to add to get youstarted trading in your own free demo account.There are a few more things that will help you get stated demo trading in lesson#5. You won't want to miss the next lesson.