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What Is a Fundamental Market Analysis?

K.C. Bruning
K.C. Bruning

A fundamental market analysis is a thorough examination of all the factors that affect the value of a security or stock. It is in-depth research of things such as the attributes of the company and how it relates to market conditions overall. The investor can use this information to assign a value to the entity and compare the figure to the market price. It can be a key element in deciding which action to take — buy, sell or hold.

Day traders frequently use fundamental market analysis to make decisions about trading. A trader will use this information to strategize and make projections about the future of a market entity. It requires that the trader is able to access new information quickly and efficiently. The success of the method depends on how predictable the reaction is to certain events and situations that affect the company.

Businesswoman talking on a mobile phone
Businesswoman talking on a mobile phone

When traders make a fundamental market analysis, they often look at both local and international economies. An analysis might also consider current events and anticipated events such as hurricanes or new product releases. The current state of the company and how its status relates to its history and the market overall are often considered as well.

Anything that is believed to affect market value can be included in a fundamental market analysis, so the specific methods that are used to conduct it can vary widely. The success of the method often depends on the elements upon which a trader chooses to focus, in addition to the way the information is analyzed. A useful review typically considers both internal and external factors that affect a company.

A company can assist with fundamental market analysis on several levels. It can help maintain a constant stream of information about world events that can help all traders with their work. In addition, it can provide resources for researching individual companies, the information from which can be used alone and with the data collected from the general overview.

Technical market analysis is another method that is frequently used by traders. Rather than focusing on external factors, traders who have a technical focus analyze trading information and related statistics to make decisions. With charts, equations and other similar tracking methods, they keep apprised of changes in the market. This method requires less comprehensive research, so it tends to be used most frequently by individual traders or firms that have fewer resources. Usually a trader will choose either the fundamental or technical method, although both can be used together.

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