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Join NowFundmental analysis is conducted based on the assumption where in the market, certain products will undervalued or overvalued.
Fundmental analysts believe that over time, the price of these overvalued or undervalued products will be adjusted to back to their "real" value. And by selling the overvalue or buying the undervalue asset, investors will be able to profit when the asset's value eventual return to their real value.
For example, if there is a cheap property avaliable in the market and you found out that there is a new subway station being constructed near it. This means that the infrastructure of the area will continue to improve and the value of the porperty will increase. Thus you can make a profit by buying the property now and wait for the market to realise the property's true value.
Same principle can be applied to the financial market.
Fundmental and technical analysis are both are important to predict the market trend, but their approach is very different.
Technical analysis focus on using data to capture the trend of the market. Fundmental analysis focus on the overall picture of the market such as the economy, the industry and other geopolitical factors such as:
Fundmental analysis observe a wide range of factors such as the country's economic performance, employment, the industry performance and the company's financial. Fundmental analysis usually take more effort to conduct but will provide you a better overview of the instrument.
While most traders tend to specialise in one of the two analystic method, the best habit is to use both analystic to compare every moment in the market.
