Fundamental analysis is a type of analysis which allows you to analyze the about a business, its competitive advantages, markets and its competitors.
When it comes to Stock and Forex, it calculates the intrinsic or real value. To calculate a stocks real intrinsic value, it uses different factors like earning capability, market shares, production capacity etc. To analyze Forex it considers on different economical indicators like gross domestic production, income level changes, interest rate changes, inflation rate, balance of trade surplus and deficit, consumer price index and government fiscal and monetary policy.
Fundamental analysis is based on a believe that price tries to move towards its real value.
The benefits of fundamental analysis are it can calculate the real value of a company, calculate the risk involved, and identify the long term investments. The major downside of this analysis is because of its large area of analysis novice can get confused with this analysis.
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