This type of analysis involves using economic data to predict price behavior in the market. Interest rates, inflation, economic growth rates, and political factors are all components of fundamentalism.
How is better than graphical analysis?
It's not about the advantages or disadvantages of this or that type of analysis, but that this or that type of analysis should suit you methodologically. If you are a chartist, working with charts will be more pleasant for you. If you like to make money on news, then fundamental analysis is what you need. Published news is not news. Future events must be anticipated. And this is art. In order to make money on the market, you do not need to know what is coming.
You can increase your chances of success by using an effective trading technique. For example, the construction of the pyramids. Fundamental analysis can help you do this. For example, in 2005, news from the European Union was the most depressing. France did not want to vote for the European Constitution. It was followed by Holland. These negative sentiments were long before the referendum. Long before the announcement of these exit polls, it was possible to draw certain conclusions. Those speculators who bet on the fall of the Euro against other currencies were the winners.
For example, at a price of $1.35 per Euro, it was possible to understand that the Euro-dollar chart would actively move towards the devaluation of the Euro. And the Euro-dollar was able to reach the level of 1.20 dollars per Euro. No one knew where the end of this movement would be, but it had come. Then the chart went up and down, and began to slowly rise, although the forecasts were different.
Analysts' prediction of Rand depreciation in South Africa
Fundamental analysis can also help you on any other currency pair. For example, the US dollar – the Rand of South Africa, you can also make a decent profit in recent years. In South Africa, strikes by miners at gold and platinum mining mines have become more frequent. Fundamental data from South Africa was also not happy. High unemployment, appalling crime could not but weigh on the Rand.
In Johannesburg, had provoked the massacres of illegal immigrants. In this case, it would be pointless to wait for the Rand to strengthen. It is possible that the government could change the % rate, and all the negative would go to the Rand chart like water in the sand. But the government did not. It is more expensive to strengthen the currency in such situations. The Rand was badly affected by the pressure of events in the suburbs of Johannesburg, where the new township was growing by leaps and bounds. Illegal immigrants and poor residents of South Africa began to build a new town from tin, boards and other junk. Investors were so alarmed that they began to withdraw their capital from this country. This could not but affect the financial sector.
The dollar and the Rand currency of South Africa devalued before our eyes. "Red ants" workers with crowbars and pickaxes under the protection of the police rushed to destroy the illegal settlement. The air was filled with the rasp of tin. The barking of the police dogs was depressing. Dark-skinned Africans could be heard singing their favorite apartheid song, "" Give me my machine gun."" All that remained was to give them weapons. Fortunately, this did not happen. Illegal immigrants began grabbing rocks and hurling them at police officers and red ants. The whole world has been covered with these images, when police officers with dark skin color disperse their own countrymen in South Africa. Meanwhile, South Africa's currency was getting cheaper and cheaper.
Fundamental analysts were in a hurry to draw the right conclusions, and they succeeded. The US dollar looked great against the Rand!