Fundamental Analysis: This approach involves studying economic and financial events and conditions that may affect asset prices. Fundamental analysts examine economic reports, corporate news, government policies, and other factors that could influence the markets. Fundamental analysis is common in the stock market and the foreign exchange (Forex) market and is used to evaluate the intrinsic value of an asset.
Some key aspects of fundamental analysis include:
- Economic data: Fundamental analysis involves reviewing and evaluating economic data, such as interest rates, inflation, economic growth, and other macroeconomic indicators that may influence asset prices.
- Political factors and economic events: Fundamental analysts also consider political factors and economic events that may affect markets, such as elections, government policies, trade agreements, and international conflicts.
- Intrinsic value: Fundamental analysis seeks to determine the intrinsic value of an asset, which means its “real” or “fair” value. If the intrinsic value is higher than the market price, the asset is considered undervalued, which could be a buying opportunity, and vice versa.
- Long-term investments: Fundamental analysis is commonly used by long-term investors looking to hold assets for an extended period.
Technical Analysis: Technical analysis is based on the study of charts and historical price data to predict future market movements. Technical analysts use tools such as indicators, chart patterns, and trend lines to identify trends, support and resistance levels, and entry and exit points. This approach is widely used in stock trading, Forex, and cryptocurrencies.
Sentiment Analysis: Sentiment analysis focuses on evaluating market sentiment and investor psychology. Sentiment analysts observe factors such as market sentiment, opinion polls, news, and social media to gauge whether the market is dominated by optimism or pessimism. This can help identify potential turning points in asset prices.