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    Posted by Shane McQuillan 25 Feb 2019

    Understanding the Application of Fundamental Analysis

    Fundamental analysis is one of the essential pillars of investments. Before one can invest in any venture, there are some critical elements that they should be able to look at. The subject is quite broad and as such most people are stranded and do not know how to use it, or even where to start. There are so many investment opportunities that end up being wasted as a result of not having a clear understanding of the use of basic fundamentals.

    What Is Fundamental Analysis

    Fundamental analysis is a method that is used in assessing a security with the objective of measuring the intrinsic value. This is done by evaluation of the financial, economic and other essential quantitative and qualitative attributes. When answering ‘What is fundamental analysis?’ there a number of concerns that the methods should seek to answer. One cannot judge an investment using the price movements only. The analysis will look at the following aspects:

    • The growth of the firm’s revenue
    • Profit margins being realized
    • Competitive advantage
    • Ability to repay creditors
    • The true financial position of the company

    Fundamental Analysis of Stocks

    The fundamental analysis of stocks is simply doing a basic valuation so as to establish the intrinsic value of the stocks. There is a huge difference between the value at which a stock is being traded and their real worth. This will help you determine the true worth of the stock. If you carry out the basic evaluation and the stocks, indicate that they have a higher value than the trading price, this would be a great investment opportunity.

    In as much as there are various methodologies that can be used to determine the intrinsic value of stocks, the overall strategy is the same. Using fundamental analysis, one is able to assess the company in future terms, factoring revenue, profits, debts and all other essential factors.

    Is Fundamental Analysis Used In Forex

    In most investment meetings, newcomers, as well as some of the existing investors, have always asked the question, “is fundamental analysis used in Forex?’ Certainly, fundamental analysis is used in Forex, just as it would be used in assessing any other investment opportunity. In this case, it would be used to analyze the economic status of the countries and regions that trade currencies often.

    Using Fundamental analysis, you can assess the economic as well as political factors that influence the money market. You will monitor the economic announcements that can have an impact on the Forex trade.


    Ultimately, fundamental analysis is a rigorous process that will scrutinize the financial statements and check all the details of a possible investment. Some of the key areas that the analysis will focus on include looking at the assets, liabilities, expenses, revenue and other essential financial responsibilities of a company. At the end of it all, you should be able to make an informed decision on a particular investment either in stocks or Forex.