Understanding fundamental news for Trading & Investment

Understanding Fundamental News for Trading & Investment

Fundamental analysis evaluates economic, financial, and geopolitical factors that influence asset prices. Unlike technical analysis (charts/patterns), it focuses on real-world events, data, and financial health to determine value.

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1. Key Types of Fundamental News

A. Economic Data (Most Impactful)

Report	Why It Matters	Assets Affected
Interest Rate Decisions (Fed, ECB)	Higher rates = Stronger currency	Forex, Stocks, Bonds
Non-Farm Payrolls (NFP)	Jobs growth → Inflation clues	USD, Gold, Indices
GDP Growth	Economic health indicator	Currencies, Commodities
CPI Inflation	Central bank policy trigger	Bonds, Crypto (BTC as hedge)
Retail Sales	Consumer spending strength	Retail stocks, USD

B. Corporate News (For Stocks)

• Earnings Reports (EPS beats/misses → Stock moves)
• Mergers & Acquisitions (e.g., Microsoft buys Activision → ATVI ↑)
• Product Launches (e.g., Apple iPhone sales → AAPL volatility)

C. Geopolitical Events

• Elections (Policy shifts)
• Wars/Tensions (Oil, Gold, Safe-haven currencies ↑)
• Trade Deals (e.g., US-China tariffs → Commodity prices)

D. Sector-Specific News

• Oil: OPEC production cuts → Crude prices ↑
• Crypto: SEC approvals (ETF) → BTC rallies

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2. How to Trade Fundamental News

Step 1: Use an Economic Calendar

• Tools: Forex Factory, TradingView Events
• Focus on high-impact events (🔴 red-marked).

Step 2: Understand Market Expectations

• Compare actual data vs. forecasts:
  • NFP Example:
    • Forecast: +200K jobs
    • Actual: +50K → USD crashes (weak economy)

Step 3: Trade the Reaction

• Buy the Rumor, Sell the News: Price often moves before the event.
• Volatility Spikes: Use limit orders (slippage risk!).
• Divergence Plays:
  • Example: Strong NFP but USD drops? → Market expected even better data.

Step 4: Pair with Technicals

• Trade breakouts/retracements after news settles.
• Example:
  • Fed hikes rates → USD ↑ → Wait for pullback to support before buying.

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3. Fundamental Strategies

A. Swing Trading (Days to Weeks)

• Catalyst: Earnings reports, rate decisions.
• Example: Buy NVDA before earnings if AI demand trends are strong.

B. Long-Term Investing (Months to Years)

• Metrics: P/E ratio, revenue growth, debt levels.
• Example: Invest in AAPL due to steady cash flow + buybacks.

C. Carry Trade (Forex)

• Borrow low-yield currency (JPY), invest in high-yield (USD).
• Risk: Central bank policy shifts.

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4. Risks & Mitigation

• Whiplash: News reversals (e.g., Fed pivot → markets flip).
  • Fix: Wait 15-30 mins post-news for clarity.
• Liquidity Gaps: Stop-losses may fail during gaps.
  • Fix: Use options or reduce leverage.
• Overreaction: “Buy the dip” after panic sell-offs.

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5. Tools for Fundamental Analysis

Tool	Use Case
Bloomberg Terminal	Professional-grade data
Yahoo Finance	Free financial statements
FRED (St. Louis Fed)	Macroeconomic data (GDP, CPI)
SEC EDGAR	US company filings