Fundamental analysis
Fundamental analysis (FA) is an independent method of evaluating securities, cryptocurrencies and companies. During fundamental analysis, an investor examines a company's financial and accounting reports and tries to determine the fair value of its securities. In addition, the economic and political situation in the market and many other factors are assessed. For cryptocurrencies, the analysis also includes the evaluation of the social activity of users and the effectiveness of the development team, project updates and several other essential factors.
Fundamental and technical analysis: what is the difference?
Fundamental and technical analyses try to determine where prices will move, but they do it differently. Technical analysis focuses solely on market indicators such as support and resistance levels, overbought and oversold, uptrends and downtrends, and others.
Technical analysis is essential for short-term game, which traders are focused on. Fundamental analysis is necessary for investors who aim at a long-term perspective.
Factors such as inflation, key rate, employment, and industrial production influence the value of securities and cryptocurrencies. Any economic factor that reduces supply or increases demand leads to higher prices. Conversely, any factor that increases supply or decreases demand leads to higher stocks and lower prices.
Stages of fundamental analysis
In FA, comparing a company or project with similar ones from their field is common. The key is that the "benchmark project" should have a fair stock valuation.
Fundamental analysis examines the company and the industry in which it operates and political and economic factors. The investor evaluates the state of the national economy, the political situation in the world and the country, and how it affects the investment. For example, in a general economic analysis, the investor is interested in what will happen to interest rates, consumption levels and the population's real income. Political factors such as presidential elections, wars, and revolutions can also affect economic conditions. Seasonality also affects prices in the market, which rise and fall due to the cyclical nature of production, weather, and social processes.
Analysing a particular industry is the next stage of FA. At this stage, the investor assesses the competition in the selected industry and the impact of foreign capital. It is necessary to consider the stage of the industry's life cycle because financial ratios differ at different stages of the cycle.
Analysing an individual company or project is the most essential stage for the private investor. Here, he studies the fundamental value of the company and its financial ratios. To analyse the company's value, the investor looks at the company's operations, reputation, technology and quality of management. These factors affect the company's value in the eyes of all investors.
Fundamental analysis of securities and crypto projects
One important step when exploring the world of cryptocurrency is to read the White Paper. You can read more about the valuation of cryptocurrency projects in our material: How to analyse crypto projects on your own?
Information for securities valuation can be found on company websites, news and analytical resources such as Investing, Bloomberg or Macrotrends. Financial news and analytics include the latest information about global financial markets and companies. News sites publish currency exchange rates, information about the results of stock exchange trading, and analysts' forecasts. On analytical portals, an investor can find essential facts about companies and the state of the economy.
To be protected from unexpected troubles, before investing, you should carefully study all available information about the chosen project, industry and market situation.
After that, you should look for ways to buy shares or tokens. The most favourable rates for buying cryptocurrencies are available on our website, BestChange.com.