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Fundamentalstrategy

Fundamentals & Technical AnalysisHow to apply fundamental analysis and macroeconomic trends to complement your technical analysis and trading strategy Fundamental analysis and macroeconomic trends are important tools for traders who want to understand the underlying forces that drive the market. Technical analysis, on the other hand, focuses on the price action and patterns of the market. By combining both approaches, traders can gain a more comprehensive and balanced perspective on the market and improve their trading strategy. Fundamental analysis of the macroeconomic environment involves studying the economic, political, and social factors that affect the supply and demand of an asset. Some of the most relevant fundamental indicators are: - Gross domestic product (GDP): This measures the total value of goods and services produced by a country in a given period. It reflects the economic growth and health of a country. A higher GDP indicates a stronger economy and a higher demand for its currency and assets. - Inflation: This measures the change in the average price level of goods and services over time. It affects the purchasing power of money and the interest rates. A moderate inflation indicates a healthy economy with stable growth. A high inflation indicates an overheated economy with excessive money supply and a lower demand for its currency and assets. - Interest rates: This measures the cost of borrowing money. It affects the profitability of investments and the exchange rates. A higher interest rate indicates a tighter monetary policy and a higher demand for its currency and assets. A lower interest rate indicates a looser monetary policy and a lower demand for its currency and assets. - Trade balance: This measures the difference between a country's exports and imports. It reflects the competitiveness and demand for a country's goods and services in the global market. A positive trade balance indicates a trade surplus and a higher demand for its currency and assets. A negative trade balance indicates a trade deficit and a lower demand for its currency and assets. To complement technical analysis and trading strategy, traders can use fundamental analysis and macroeconomic trends to identify the long-term direction and strength of the market, as well as potential opportunities and risks. For example, suppose a trader wants to trade EUR/USD, which is the exchange rate between the euro and the US dollar. The trader can use technical analysis to identify the support and resistance levels, trend lines, chart patterns, indicators, and signals on different time frames. The trader can also use fundamental analysis to assess the economic conditions and outlook of both the eurozone and the US, as well as their relative interest rates, inflation rates, trade balances, and other factors that affect their currencies. Suppose the trader observes that the eurozone has a higher GDP growth rate, lower inflation rate, positive trade balance, and stable interest rate than the US. The trader can infer that the eurozone has a stronger economy than the US, which implies a higher demand for the euro than the US dollar. The trader can also observe that the EUR/USD is in an uptrend on the daily chart, with higher highs and higher lows, supported by a rising moving average. The trader can conclude that the fundamental analysis confirms the technical analysis, which suggests that EUR/USD is likely to continue to rise in the long term. The trader can then use technical analysis to find an optimal entry point to buy EUR/USD. For example, suppose the trader sees that EUR/USD is retracing from a recent high to test a support level at 1.2000, which coincides with a 50% Fibonacci retracement level and a rising trend line. The trader can also see that there is bullish divergence between the price and an oscillator indicator such as RSI or MACD, which indicates that the downward momentum is weakening. The trader can decide to buy EUR/USD at 1.2000, with a stop loss below 1.1900 and a target at 1.2200. By applying fundamental analysis and macroeconomic trends to complement technical analysis and trading strategy, traders can gain a deeper understanding of the market dynamics and enhance their trading performance. If you are stock trading, you should consider the following fundamental indicators which are all readily available as trends on the TradingView platform: - ROE (Return on Equity): This indicator measures how effective a company is in generating profits for its shareholders. It is calculated by dividing the net income by the shareholders' equity. A high ROE indicates that the company is using its resources efficiently and creating value for its owners. - EPS (Earnings Per Share): This indicator measures how much profit a company makes per share of its common stock. It is calculated by dividing the net income by the number of outstanding shares. A high EPS indicates that the company is profitable and can potentially pay dividends or reinvest in its growth. - DYR (Dividend Yield Ratio): This indicator measures how much dividend a company pays per share of its common stock relative to its earnings. It is calculated by dividing the total dividends by the net income or the dividend per share by the earnings per share. A high DYR indicates that the company is rewarding its shareholders with a steady income stream and has confidence in its future prospects. - FCF (Free Cash Flow): This indicator measures how much cash a company generates from its operations after deducting capital expenditures. It is calculated by subtracting the capital expenditures from the operating cash flow. A high FCF indicates that the company has enough cash to pay its debts, invest in new projects, or return money to its shareholders. - PEG (Projected Earnings Growth): This indicator measures how fast a company's earnings are expected to grow in the future relative to its current price. It is calculated by dividing the price-to-earnings ratio by the annual earnings growth rate. A low PEG indicates that the company is undervalued and has strong growth potential. These fundamental indicators can help traders to identify stocks that are overvalued, undervalued, or fairly priced based on their financial performance and future prospects. They can also help traders to compare different stocks within the same industry or across different industries and sectors.
BITSTAMP:BTCUSDEducation
by JS_TechTrading
Fundamental analysis in cryptoThrough fundamental analysis , we can try to detect the authentic and objective value of cryptocurrencies in spite of their market price. Through these techniques, we can assess whether a cryptocurrency is undervalued or overvalued, and we can detect a trading opportunity. With fundamental analysis , traders evaluate and study what can affect the price of a security, such as external factors or events. This type of analysis takes advantage of tools like periodic financial statements, financial ratios, economic forecasts and other types of additional information that can affect the value of a security. There are different approaches to fundamental analysis that analyse micro and macroeconomic variables in different ways: 1. Top-down approach: through this approach, the trader analyses macroeconomic variables first and then microeconomic variables. Global information is taken in first, followed by more detailed and specific values and variables addressed. With this approach, the trader looks at the world economic situation, and then looks more at the most economically attractive countries, along with the sectors with the most potential, and within them, chooses which ones are most convenient to invest in. 2. Bottom-Up approach: this approach is the opposite of the previous one: first the trader chooses companies with growth potential, analyses the sector they operate in and then the economic situation of their countries; the overall global economic situation is the last thing to be analysed. THE ADVANTAGES: This approach allows the investor to collect and analyse information external to the markets but that might still influence prices. This way, the investor has a clearer vision of the reality of the market. THE DISADVANTAGES: The trader using fundamental analysis needs more thorough knowledge and experience of accounting, business and, in the specific, the sector of interest. Moreover, investment terms with a fundamental analysis are longer because it requires more studying and background with respect to other analytical tools, like technical one. It can also be outweighed by chance factors, such as physical disasters affecting commodity prices and companies in general. In general, markets can also be surprised by unexpected changes in economic and political scenarios. In the specific case of crypto markets, fundamental analysis can be used to analyse the exterior components that can affect cryptocurrencies. Fundamental analysis can be carried out by looking at its use cases or community, but also at the team behind every specific crypto project, something that tells a lot about its overvaluation or undervaluation. Indeed, in the case of crypto markets, there are no financial statements, and therefore they cannot be evaluated as normal financial assets. Most cryptocurrencies are still in the developing stage and they do not have a lot of real-world applications; they rely mostly on miners, users and, of course, developers. It can be of great importance given that crypto markets are relatively more volatile and less stable than others, and due to their irregular situation investors react quickly to exogenous factors. These factors can vary and go from regulatory pressures to simple tweets - take Elon Musk as an example. Fundamental analysis can indeed help comprehend the fair value of crypto assets - data about this can be found on different websites, such as Reddit or Telegram. The use of technology is of utter importance. The investor can assess the usability of the adoption of the cryptocurrency he's interested in, but this tool can also be used to study how governments value cryptocurrencies and whether they want to implement new regulatory policies about it. We can also identify the progress that it's being made in terms of technology, such as how the activity of cryptocurrency is developing, along with its software or media coverage - all these factors contribute to increasing the crypto asset's value. From a psychological point of view, it can also help the investor trade with more confidence, knowing that a thorough analysis has been carried out. When the analysis is done daily, it can help you develop a finer investment strategy. In terms of financial metrics, what can be used is: Market capitalisation: the investor can look at the total market worth of cryptocurrency, which indicates whether there is space for growth. To get that, you multiply the current price per coin by its supply. Liquidity, or how easy it is to buy or sell the asset. A liquid market is a competitive market and is usually favoured by investors, also because it entails a lower bid-ask spread. Volume: it spurs liquidity because it is telling of how much money has been exchanged for a certain asset. Fundamental analysis usually prioritises the assessment of transaction values. If the transaction value is consistently high, it means that the cryptocurrency is in steady circulation. Fees: they reflect the demand on the blockchain. Every cryptocurrency can have its own transaction fee. The assessment of the fees paid over various periods gives the trader an idea of how secure the crypto asset is. Supply mechanisms: general microeconomics state that when supply is low and demand is high, price rises. A general belief for cryptocurrencies is that when supply runs out, the price will rise (this is, for example, a general prediction of Bitcoin holders). On the other hand, investors can also use project metrics for their fundamental analysis: Whitepaper: it is a technical document outlining the purpose and operation of the project. It should comprise the blockchain technology solutions, the use cases for the currency, the planned features and upgrades, sale and team information, and tokenomics (the factors that impact the tokens' use and value). The team: crypto teams are easily accessible to assess nowadays so that the investor can learn more about them and their credibility. The competitors: the investor can conduct an analysis of the crypto assets; competitors. If there are other cryptos which are more widely adopted or valuable, maybe it is best to back off from the item of interest. Last but not least, important instruments when evaluating cryptos through fundamental analysis are Blockchain metrics or On-chain metrics. The rising popularity of blockchain has made sure that lots of different types of information could become extremely popular, such as the number of active users, total transactions and transaction value. There are three fundamental metrics in this case: 1. Hash Rate : this is a measure of the mining machine's ability to conduct hashing computations in an efficient way. The hash rate also determines the profitability of the miner, as it indicates the likelihood that a block will be mined, and, indirectly, the chance of receiving the block reward. An investor should look at cryptos with a more extensive network because they are more resistant to attacks or data manipulation. 2. Status and Active Addresses: active addresses measure the number of dynamic blockchain addresses over a period of time. They are helpful in comparing the growth or decline of the activity or interest in the coin or token. The investor can also get to the active address through the computation of the total number of unique addresses over time (and a comparison of the results). 3. Transaction values : they can be determined for the assessment of the regular circulation of the crypto asset. It indicates how much money was exchanged on a given period, and therefore, the number of transactions.
BITMEX:XBTEducation
by vf_investment
JS-Masterclass #3: FundamentalsIn the recent tutorial 'Trading with the Trend - Stage Analysis', we have explained the importance of identifying stocks in a confirmed stage 2 uptrend using the 'Trend-Template'. What are the Fundamentals doing in a confirmed stage 2 Uptrend? The best stocks and buying opportunities available in the market meet the technical requirements according to Minervini's Trend-Template and have very healthy Fundamentals. Best Candidates - Growth - Accelerating EPS and Revenues - Explosive Market Position - Sustainable Trends - Scalable Business Model Worst Candidates - Capital Intensive - Limited Pricing Power - Heavily Regulated - Margin Pressure - Eroding Industry Position Watch out for these 3 key fundamentals – Earnings, Sales and Margins 1) Earnings in most recent 2-3 quarters +20% or more – the bigger the better; look for earnings acceleration – quarter to quarter sequential. Look at a 2 quarter average (up 20%) 2) Sales acceleration: sales increasing in most recent 2-3 quarters 3) Check profit margins – are they expanding or contracting? 4) Combination of sales and margins = earnings: gauge current growth versus 3-5 year growth rate (look for acceleration), Look for a breakout year How Do You Know if an Earnings Report is Really Great? 1. Results are better than the consensus of analysts’ estimates or, even better, earnings come in above the highest analyst estimate. Why? This will get the stock on the radar screens of big institutions. 2. The company raises its guidance for the upcoming quarter and the fiscal year significantly. 3. The stock price reacts positively to the earnings report and/or company issued guidance and resists meaningful profit taking over a number of days or weeks. 4. Analysts promptly raise estimates. (More than a 5% change from 30-days earlier is meaningful). 5. Revenue is reported above the consensus estimate (preferably above the highest estimate) and is also revised upward. 6. Earnings are “quality” – profit improvement comes from increased sales as opposed to a one-time gain or non-operating/non-recurring income. Keep in mind, cost cutting or “productivity enhancements” have a limited life span. 7. You can check Return on Equity to get an idea how good management is doing. You should compare this number to other companies in the same industry. 15-17% is a good cutoff for most stocks. Red Flags • Material earnings deceleration is a warning • Eroding margins is a warning • Positive earnings with negative sales – limited life span • A company showing strong earnings but not paying much in taxes is a red flag Even if you have found a stock with great Fundamentals: - Never trust the story - Never trust the numbers - Unless confirmed by price action
Editors' picks
Education
by JS_TechTrading
6
Risk On Risk Off Helpful Proces Spy VS Btc VS Dollar Dxylets review Risk On Risk Off Helpful simple process Spy VS Btc VS Dollar Dxy also Remember trading is risky . Hi traders over the past 28 years trading this correlation has been simple and helpful as an added barometer of assets movements that you can add and watch in your tradingview charts with no extra indicators. Over time the dollar has always been perceived as a strong stable currency and when people move dollar up it is usually perceived as a defensive move by market participants and therefore a risk off situation for speculative assets. Usually what is helpful lately is looking at the SPY vs BTC and compare to the dollar DXY representing safety. Usually dollar Up = SPY + BTC down = Risk Off and vice versa Usually dollar Down = SPY + BTC Up= Risk On Hope this video was helpful
AMEX:SPYEducation
by PowerIndicators
2
How to trade fundamentals (AUDUSD BUYS)Hey traders! A common question I get is, do I trade fundamentals?? -From my experience it is to hard to trade off the back of data releases as the moves are to quick to happen and usually get very messy... -Fundamentals I believe just help push a currency in the right direction as technicals give us the entry points to catch these moves -For me its a rule to always have my stop-loss at breakeven when trading around the times of any news event or data release. -It is important that we always know when a big event or release is coming out to cover any trades we currently have running or are about to open, price can move so quick and cause slippage on accounts especially if you are over leveraged. -So the answer is I do and I don't trade fundaments, the aim of the game for me is to already be in a position with stops at breakeven to catch the bigger move but also protecting my account at the same time, at the end of the day we never know what's going to happen and price can do some wild things... ......... fundamentals overall control the market but technicals provide us with the entry points and create market structure.........
Education
by jamison_fx
14
Fundamental Case Study -Interest rate cut, boost of inflation.Fundamentals can be hard to trade and are almost always of no logical predictable direction. So how can we trade fundamental news and events? This question can be answered in many ways. However, we want to put an accent now on high impact fundamental events that are impacting an economy in the longer term, and not daily data releases/news which create almost none volatility for our interest. Each and every year there are few such events, some creating huge movements in one day/on the opening, others creating strong bullish/bearish trends in the longer term. These events can be categorized in wars, attacks, pandemics, bankruptcy, federal banks drastic decisions, and more. In this case study, we will analyze the FED's data releases due to the latest COVID-19 threats. On Tuesday, 03 March 2020 The FOMC cut the federal funds rate by 0.50% to a target range of 1.00% to 1.25% at an unscheduled emergency meeting. This measure was taken due to the pandemic disturbance of the markets: "The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. In light of these risks and in support of achieving its maximum employment and price stability goals, the Federal Open Market Committee decided today to lower the target range for the federal funds rate by 1/2 percentage point, to 1 to 1‑1/4 percent. The Committee is closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy ..." - Federal Reserve issues FOMC statement, 5:00 PM - Mar 3, 2020 What does this mean? And how can traders benefit from this fundamental impact factor? The Federal Funds rate is the Interest rate at which depository institutions lend balances held at the Federal Reserve to other depository institutions overnight, and is scheduled 8 times per year. Usually cutting or increasing the interest rate happens over a longer period of time, by 25 basis points at once. These short term interest rates are the paramount factor in currency valuation - traders look at most other indicators merely to predict how rates will change in the future. By adjusting the right interest rates, with the purpose of economic growth, the FED keeps it's inflation targets through short periods of time. Because the FOMC cut the federal funds rate, at an unscheduled emergency meeting by 50 basis points, it surprised the market and it reacted appropriately. This means drastically devaluation of the US Dollar on the short term. And Market Makers acted accordingly, selling the US Dollar. We can see on the charts a few trades we took after the data releases. In this case study, you can also see how it impacts the overall economy, creating movements on more instrument categories. GOLD, Currencies, yields, indices. If you want to further explore this case study, or learn more about fundamentals, don't hesitate to follow us on our free education blog on Instagram and shoot as a dm for further questions.
TVC:DXYEducation
by TradingExpertGroup