Fundamental analysis is the study of the economic forces that affect world markets. Many traders believe that it is the best way to trade. Some of these traders include big names like George Soros and Warren Buffet. For many years before the advent of technical indicators became so popular. Fundamental analysis was the main steam technique that traders used to trade. The benefit of fundamental analysis is that it acts as a leading indicator rather than a trailing indicator. That means it will help predict the way the market might move instead of making a historical commentary on what the market has done before.
Fundamental analysis as an indicator gives an estimate of how the market will react. A skilled trader can use these estimates to predict a winning trade. To properly use fundamental analysis, a trader must first understand the economies that currencies represent. For example, if a trader trades the EUR/USD pair, then a deep understanding of the European continent and the US economy is essential.
The best resource is the Internet; one of the advantages is that the news provided is free. In fact, many brokers also provide news and a calendar for when there is breaking news.
In answer to the question “Fundamental analysis is the best way to trade, IS this true?”
I have to say “maybe” or “it depends” as the reason is what type of trader you are. If you like to read charts and need to prove to yourself that the market will move in this or that direction with technical indicators, then fundamental analysis is not for you. In fact, nothing you say or do will make you feel comfortable enough to trade profitably. If you insist and then try to use the news to trade, you will most likely suffer a lot and lose a lot of money.
On the other hand, if you are comfortable watching the news and know enough about how forces in the world react to each other, then Fundamental Analysis is for you. Both technical and fundamental methods are profitable, just be GOOD and practice money management.
Sharing the single most important factor that will make you rich has nothing to do with any analysis. This element brings certainty to a very uncertain market. This skill is the skill of proper money management. You can use a coin toss to decide your entry and exit and still be profitable if you practice money management with good trading psychology. Learn more and learn well.
