The fundamental analysis looks at economic, political and social factors. Any news about the economy, large companies, political instability or social factor can cause a reaction on the stock market exchange in one way or the other.
It basically means analysing the news to find opportunities to trade in specific assets. When something big happens, you might expect the market to react on this, which could benefit you as a trader. The best part is that it does not matter if the news is good or bad since you are able to “Long” or “ Short” with CFD trading.
For example: There is an upcoming release of the new iPhone by Apple. People are excited and analysts forecast that Apple is going to make a lot more profit. This positive news gives investor confidence in the company, which means that the price of the asset will rise. Positive news will move the market in an upward trend. For you as a trader it means that it is now very interesting to “Long” when you trade in Apple.
It also works the other way around. Negative news could cause investors to lose confidence in a specific company or asset. This could cause a downtrend, which makes it interesting to “Short”.
Using the fundamental analysis it is possible to better predict the possible change in an asset’s price. The advantage of this analysis is that you don’t need specific knowledge about trading or financial markets and it is easy to analyse the news. This will help you make better and quick decisions when trading.