Fundamental Trading Course
Module 1: Introduction to Fundamentals in Trading
1.1 What is Fundamental Analysis?
Fundamental analysis helps traders and investors assess the
intrinsic value of an asset. It looks at economic indicators,
industry trends, and company data to determine whether an asset is
overvalued or undervalued.
Example: If a company's revenue consistently grows but its stock
price remains stagnant, it could be undervalued.
1.2 Key Differences Between Fundamental and Technical Analysis
- Fundamental Analysis: Focuses on "why" the price should move
based on economic or company factors.
- Technical Analysis: Focuses on "how" the price has moved
historically to predict future trends.
Example: A trader uses fundamental analysis to predict the dollar's
value will rise due to the Federal Reserve's rate hike but uses
technical analysis to find the best entry and exit points.
Module 2: Core Economic Indicators
2.1 GDP and Growth Rates
GDP measures a country's total output. Higher GDP growth signals a
strong economy, attracting investment.
Example: A rising U.S. GDP can strengthen the USD, making
USD/JPY a more attractive trade.
2.2 Inflation and CPI (Consumer Price Index)
CPI tracks the cost of living by measuring changes in the price of
goods and services.
Example: If CPI rises above expectations, traders might anticipate
central bank rate hikes, boosting the currency.
2.3 Interest Rates
Central banks adjust interest rates to control inflation. Higher rates
often strengthen currencies but can hurt stocks.
Example: If the ECB raises interest rates, EUR/USD may rally as
higher yields attract foreign capital.
2.4 Employment Data
Employment data shows economic health. Strong numbers boost
spending and growth.
Example: A higher-than-expected U.S. non-farm payrolls report might
lead to USD strength against other currencies.
Module 3: Understanding Central Banks
3.1 Role of Central Banks
Central banks manage monetary policy to ensure economic stability.
They adjust interest rates, manage inflation, and oversee financial
systems.
3.2 Monetary Policy Tools
- Open Market Operations: Buying or selling government bonds to
control money supply.
- Interest Rates: Raising/lowering rates to stimulate or cool the
economy.
Example: The Fed uses quantitative easing during a recession to
inject liquidity into markets.
3.3 Central Bank Statements and Meetings
Statements provide insight into future policy moves.
Example: If the Bank of England signals tighter policy, GBP may rise
against weaker currencies like JPY.
Module 4: Analyzing Financial Markets
4.1 Forex Market Fundamentals
Currencies are driven by factors like trade balances, geopolitical
stability, and interest rate differentials.
Example: A strong U.S. dollar may hurt emerging market currencies
due to capital outflows.
4.2 Stock Market Drivers
Corporate earnings, economic growth, and sector performance
influence stock prices.
Example: Positive Apple earnings can boost tech stocks and the
Nasdaq index.
4.3 Commodity Market Dynamics
Commodities depend on supply-demand and external risks.
Example: Oil prices rise during supply disruptions, benefiting
oil-exporting currencies like CAD.
Module 5: Corporate Fundamentals
5.1 Earnings and Valuations
Investors use metrics like P/E ratios to determine fair value.
Example: A tech company with a low P/E ratio compared to its peers
might be undervalued if its growth potential is high.
5.2 Balance Sheets and Financial Health
A strong balance sheet indicates a company's ability to survive
economic downturns.
Example: A company with low debt and high cash reserves is safer
during a recession.
Module 6: Tools for Fundamental Analysis
6.1 Economic Calendars
Platforms like Investing.com provide calendars highlighting critical
economic events and data releases. Traders use this to prepare for
market volatility.
6.2 News and Reports
Financial news platforms and analyst reports help traders understand
the broader market context.
6.3 Fundamental Screeners
Screeners help filter assets based on financial metrics like P/E ratios
or macroeconomic indicators.
Module 7: Developing a Fundamental Trading Strategy
7.1 Integrating Fundamentals with Trading Plans
Combine fundamental insights with technical strategies to align
long-term trends and short-term entry points.
7.2 Risk Management and Position Sizing
Set stop-losses, calculate position sizes, and limit portfolio exposure
to protect against unexpected market moves.
7.3 Case Studies
Example: Brexit referendum (2016) caused GBP/USD to plummet due
to uncertainty.
Module 8: Advanced Topics
8.1 Geopolitical Risks
Wars, trade disputes, and elections can disrupt markets. Traders
must monitor these to adapt strategies.
Example: The Ukraine conflict boosted oil and gold as investors
sought safe havens.
8.2 Correlation Analysis
Understanding relationships between assets, like gold's inverse
correlation with the USD, aids in better risk management.
8.3 Behavioral Economics
Market movements often reflect investor psychology. Awareness of
biases (e.g., fear, greed) helps avoid emotional decisions.
Example: Market panic during COVID-19 led to a sell-off despite
strong fundamentals in some sectors.
