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Fundamentals for Traders
Tutorial
Everyone would probably agree that the
“fundamentals” – or at least traders’ perception of them – are
ultimately the driving force underlying market prices. Much of
today’s market analysis is based on prices, but it is the
fundamentals that produce the prices. The challenge for traders is
how to best learn about and study fundamentals in markets.
Unfortunately, despite their significance, there is no quick and
easy way to study market fundamentals, and you can’t find resources
that focus only on fundamentals that impact all markets.
The most obvious fundamental factors are supply
and demand for a particular market, especially the physical
commodities. But lots of macro fundamental factors effect
supply/demand and impact commodity and financial futures prices:
weather, world politics, consumer tastes and consumer attitudes,
disruptions in distribution channels, inflation, interest rates,
currency values, natural disasters and much more.
The number of fundamentals is enormous, adding
to the difficulty of trying to interpret what they mean even when
you do have the most recent reliable data. Every market is affected
by fundamentals in related markets, putting an emphasis on
intermarket analysis, but every market also has its own set of
fundamentals.
For most traders, perhaps the most useful
advice on fundamentals is to know when the key known events –
reports, news releases, elections, etc. – are going to occur. You
can’t predict the surprises – tsunamis, assassinations, etc. – but
for those events that are scheduled on a calendar, you should be
aware of the time when they could cause a price ripple, even though
you rely on technical analysis for your trading decisions. It would
be a bonus to know something about the history behind the event and
have an idea about what traders are anticipating on an upcoming
announcement.
This tutorial provides an overview of
fundamentals, but a trader involved in a specific market should find
other sources to study the fundamentals for that market in more
detail.
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Moving Targets
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‘Cash’ Markets
and ‘Basis’ Levels
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Economic
Reports
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Major U.S.
Economic Indicators
Main Trading
Resources Section |
