Trader's Glossary

Fundamental Analysis

Fundamental analysis is a method of market analysis primarily focusing on the external factors that affect the price of a security. This school of analysis presupposes that securities are always either over- or under-priced and are thus perpetually correcting themselves towards their true value. Fundamental analysts focus on the economic, geo-political and social climate, as well as macroeconomic factors such as: output, income, unemployment, GDP, inflation/deflation. The purpose of this type of analysis is to identify whether a certain security is over- or under-priced and then to take the appropriate position.