Fundamental analysis is based on the interpretation of economic climate and market data. The experts of this form of analysis are very much concerned about the financial well-being of a particular financial entity that they are analyzing. These analysts depend on reports and live events, GDP or Gross Domestic Product of a country, the rate of employment or unemployment in a country, the fiscal and monetary policies of the government, the impact of such government policies and economic climate within the country on its currency, the international trade relationships of the country with other countries and several other factors. When analyzing a particular financial entity like a particular company, the analysts will look at the performance reports of the company and will try to assess how these reports are going to affect the stocks of the company and their respective indices. What you will find is that they will not take account of the prices of the assets.
You just need to understand that Fundamental analysis will never take account of prices. It will actually take account of some data that will help with the interpretation but it is not price. In this form of analysis, traders will have to concentrate on local and global news, predictions and every other factor but price that can affect the market performance. Of course, some of these factors are mathematically or statistically measurable but there will be factors which cannot be measured. The only way to take account of those factors is to go for ‘if this then that’ approach. In other words, this form of analysis is all about logical interpretation of events. Here events can be isolated or they can be linked to one another. No matter what, every event will lead to a logical conclusion. The logic applied can turn out to be wrong but that is something you need to work on.
Fundamental analysis is not easy but with practice and diligence, you will eventually learn from your past experiences. Yes, there will be mistakes but they should not hinder your analytical abilities. Every failure will give you a vital lesson that you can use in future trades. However, the best thing to do is to look at expert analysts. Always remember that even an expert analyst can make mistakes at times so, never forget to apply your own thoughts.