Fundamental analysis is analyzing factors that can impact the asset price now or in the future. This type of analysis depends on analyzing the current and external events, as well as economic data, and sector’s development.
Fundamental analysis is one type of two to approach markets, the other method is technical analysis.
Fundamental analysts look at factors that are driving the prices, unlike technical analysts who look at charts and other technical indicators to determine what is next.
You can find multiple tools and techniques to approach fundamental analysis, but mainly there are 2 ways: first top-down analysis, a wider look on economy, starting by looking at the market as a whole, before focusing on a sector or an industry related to the asset, second, bottom-up analysis, starts from the narrow view to a wider one.
Fundamental analysis is used to evaluate stock prices, but it can be used across a wide array of asset: stocks, bonds, Forex, commodities, and indices.
Fundamental analysis tools differs from one trader to the other depending on the type of asset.
For example, while analyzing stocks some look at the: revenue, earnings per share (EPS), expected gross, and margins.
Meanwhile in forex, traders use economic data issued from central banks, that speaks of the economic stability of the country.