Current prices reflect best guess of collective market mind about future outcomes (data releases, central bank, fiscal decisions, respective capital inflows, outflows from some asset or asset class etc.). Basically you have to be consistently better than market in those predictions based on the data you have if you want to trade successfully using fundamental analysis
How do you fundamentally analyze the market?
- Thread starter SmithFX
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I appreciate your method of market analysis and tell me how do you calculate their impact?
Ive developed my own unique proprietary risk-factor weighting system which determines allocations for equity, fixed income, cash, and hedging positions.
Yup. That's how I do it.
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Fundamental analysis involves two things: understanding what is priced in asset prices (like long period of low inflation after Covid, due to weak growth expectations) and figuring out how wrong may be such expectations (underestimation of global money supply boom effect, which is the key medium-term driver of inflation). This presents opportunity to make medium-term profitable bets. But times, when markets become irrational enough to spot it for a retail trader are rare, most of the time market prices reflect best guess about future outcome which you are unlikely to beat consistently.
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Good points, funds, fundamental+ technical;
but really does not apply to many businesses when it comes to making/taking a profit......
I would say it depends on your time frame, the longer you go out, the more fundamentals should come into play. As for shorter time frames, I would say it's more impulsive and emotionally based trading. Retail and retail whales vs banking and large entities.
For stock market it should be cashflow based models discounted by correct interest rate that reflects risk for that company. But it's not easy most of the times you will likely use some heuristic conclusions or assumptions taken out from a thin air.
Then what are the benefits of doing that? It might be a good exercise but it doesn't seem too effecient.
Why not just lookup the top holdings of the major ETFS and trade the technicals of those few stocks?
Just use their heuristics and assumptions taken out of thin air.
It seems to me that it is almost completely hands down approach, I tend to avoid that because we are inherently lazy you know, so delving into something more complicated helps to generate lots of new ideas, I would never arrive with simple approach.