The Why of
Price Valuation
Fundamental analysis focuses on the why of price valuation
for a stock, an index, or a currency. Multiple factors affect
the value of an asset or market, and in this part of the book we
attempt to explain those factors in simplified terms. We need
to be aware that fundamentals move the market on both the
short-term and long-term levels because that can provide the
basis for a trading decision. However, when it comes to execution,
which involves the when and the how in the trading
equation, we rely on additional information to supplement the
fundamentals.
Fundamental analysis historically has been used to evaluate
the worth of a company by valuing its stock price. As we have
seen new markets emerge and new financial instruments
develop, fundamental analysis has been used to price those
markets and instruments as well. When applied to the forex
market, fundamental analysis has a twofold purpose: determining
the short-term impact on currency prices and forecasting
long-term trends. We will examine some of the underlying
The Why of
Price Valuation
Fundamental analysis focuses on the why of price valuation
for a stock, an index, or a currency. Multiple factors affect
the value of an asset or market, and in this part of the book we
attempt to explain those factors in simplified terms. We need
to be aware that fundamentals move the market on both the
short-term and long-term levels because that can provide the
basis for a trading decision. However, when it comes to execution,
which involves the when and the how in the trading
equation, we rely on additional information to supplement the
fundamentals.
Fundamental analysis historically has been used to evaluate
the worth of a company by valuing its stock price. As we have
seen new markets emerge and new financial instruments
develop, fundamental analysis has been used to price those
markets and instruments as well. When applied to the forex
market, fundamental analysis has a twofold purpose: determining
the short-term impact on currency prices and forecasting
long-term trends. We will examine some of the underlying
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