Fundamental Analysis For Dummies A Guide For Beginners At CAPEX

When it comes to a serious, long-term investment, technical analysis won’t cut it. You’ll need to know the real intrinsic value of the asset and the best way to determine this value is through fundamental analysis for trading.

At CAPEX, we offer tools for researching tradable instruments and we at CAPEX want to make sure you fully understand fundamental analysis. We have prepared this “fundamental analysis for dummies” guide to tell you everything about this topic.

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Multiple Trading Platforms

There’s more than one way to trade over 2,000 assets online at CAPEX. Besides a free trading account, we also offer two trading platforms with a WebTrader and the third-party MetaTrader 5 trading platform. Both platforms feature great trading tools for conducting technical analysis and monitoring your trades.

CAPEX trading platforms are available on mobile too, meaning traders can execute trades on the go and monitor them at any time of their choosing. The free demo account is a perfect representation of the WebTrader platform and features the live real markets with virtual currency. We at CAPEX consider ourselves the complete experience.

Integrated Tools

At CAPEX, we have made sure that all traders have access to the most advanced tools available. These tools provide traders at CAPEX with a very unique edge that other brokers may not provide. Like the Hedge Fund Activity feature that follows the trades of professional hedge fund managers and the new sentiment that provides traders at CAPEX with a better overall picture of the markets.

Times have changed and we supply opinions from influential bloggers. The daily analyst ratings show traders what the highest-rated financial analysts are trading and their thoughts on market price movements. You can have a significant amount of base covered at CAPEX.

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What is Fundamental Analysis?

The best way to start is by explaining fundamental analysis for traders, but this guide will also be useful if you already have experience with online trading of CFDs. Essentially, fundamental analysis is the measurement of the intrinsic value of a particular instrument or security. That means studying several financial and economic factors. This can be basic, but it can also extend to macroeconomic factors like company management effectiveness.

While most would consider fundamental analysis to be reserved solely for the stock market it can be used on any asset – even cryptocurrencies have a company you can look into, and a cryptocurrency has a defined intrinsic value based on its purpose.

How to perform Fundamental Analysis?

To perform fundamental analysis for trading, you’ll need to focus on three crucial data sets: historical data, private information, public information. To begin you’ll need to pick a stock to analyse. Gladly, you have plenty of options to choose at CAPEX. Then you’ll be set to do everything to understand the company – this means business model, operations, and basic business functions. Next, closely study all the financial reports the company has issued. These are easy to access and you shouldn’t have a problem finding them.

Don’t forget to check out competitors too. Analyse and study them. You’ll want to know how your chosen company is sitting in the industry and how competitors may offer something that may challenge the company. Finally, research and analyse the prospects of the company – we’re talking intrinsic value here and whether the company has a good future.

Fundamental Analysis and Trading

To trade using fundamental analysis, you would need to create a model for ascertaining the estimated value of the share price of a particular company. The model will be based on publicly accessible data and the value is only an estimate – a stark contrast to technical analysis that relies on real-time prices.

You’ll be looking to follow professional analysts. If an analyst determines that a stock’s value should actually be substantially higher than its current valuation, they’ll release a buy rating – consider this as a signal, much like a bullish signal in technical analysis. Of course, if an analyst thinks a stock valuation is actually too high, then they’ll publish a sell rating instead. This is an important rating too. However, you’ll also find it valuable to do your own research when trading stocks with CFDs, or CFDs on any other market, so you can make informed decisions.

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Quantitative V. Qualitative Fundamental Analysis

Fundamental analysis for trading has a rather broad reach that covers every economic factor you can think of. Since there are both statistical, numerical based data and a more human quality such as company management to be considered, fundamental analysis can be broken down into two distinct categories: qualitative and quantitative. While each category is unique, neither is considered to be better than the other – that means both need to be utilised when performing fundamental analysis.

At CAPEX, you’ll be able to use the many resources we give you to perform both quantitative and qualitative analysis, including daily analysts ratings, bloggers opinions and news sentiment.

 

Quantitative Fundamental Analysis

Quantitative analysis refers to numbers. Plain and simple this is your research of numeric data such as profits and losses. You’ll be looking at financial statements and measuring assets, revenue and profits. Combining these measurements will create financial and fundamental ratios that can then be compared against other companies. You could take that ratio and compare it to a direct competitor or even against companies in a different industry.

Popular quantitative ratios include:

  • Dividend Yield
  • Price to Earnings Ratio
  • Price to Earnings Growth
  • Return on Equity

Educational Resources

We, at CAPEX, provide access to a complete trading academy and many other educational features. The CAPEX Academy teaches everything from trading strategy to how to use the functionalities of the CAPEX trading platforms. We provide vast featured articles that cover the widest range of financial topics possible. There are also dedicated webinars at CAPEX that are free of charge and incredibly insightful for both new and experienced traders. If traders are ever struggling, there is the financial dictionary that covers slang to the most technical of terms.

What is Fundamental Analysis?

The best way to start is by explaining fundamental analysis for traders, but this guide will also be useful if you already have experience with online trading of CFDs. Essentially, fundamental analysis is the measurement of the intrinsic value of a particular instrument or security. That means studying several financial and economic factors. This can be basic, but it can also extend to macroeconomic factors like company management effectiveness.

While most would consider fundamental analysis to be reserved solely for the stock market it can be used on any asset – even cryptocurrencies have a company you can look into, and a cryptocurrency has a defined intrinsic value based on its purpose.

How to perform Fundamental Analysis?

To perform fundamental analysis for trading, you’ll need to focus on three crucial data sets: historical data, private information, public information. To begin you’ll need to pick a stock to analyse. Gladly, you have plenty of options to choose at CAPEX. Then you’ll be set to do everything to understand the company – this means business model, operations, and basic business functions. Next, closely study all the financial reports the company has issued. These are easy to access and you shouldn’t have a problem finding them.

Don’t forget to check out competitors too. Analyse and study them. You’ll want to know how your chosen company is sitting in the industry and how competitors may offer something that may challenge the company. Finally, research and analyse the prospects of the company – we’re talking intrinsic value here and whether the company has a good future.

Fundamental Analysis and Trading

To trade using fundamental analysis, you would need to create a model for ascertaining the estimated value of the share price of a particular company. The model will be based on publicly accessible data and the value is only an estimate – a stark contrast to technical analysis that relies on real-time prices.

You’ll be looking to follow professional analysts. If an analyst determines that a stock’s value should actually be substantially higher than its current valuation, they’ll release a buy rating – consider this as a signal, much like a bullish signal in technical analysis. Of course, if an analyst thinks a stock valuation is actually too high, then they’ll publish a sell rating instead. This is an important rating too. However, you’ll also find it valuable to do your own research when trading stocks with CFDs, or CFDs on any other market, so you can make informed decisions.

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Pros and Cons of Fundamental Analysis

Like the candlestick patterns, stock option, cryptocurrency, or anything else in life, there are both an upside and downside to conducting fundamental analysis. Like most research when it comes to trading the best way to overcome these limitations is to use multiple forms of analysis and to test any strategies in the CAPEX demo account first.

Pros

Fundamental analysis can help traders identify stocks worthy of investing in. Fully understanding the complexities of both the stock market and the industries that companies operate will help an investor greatly. Fundamental analysis will help traders at CAPEX avoid the pitfalls of the financial world. Fundamental analysis can help isolate the better trading opportunities too. When a series of stocks seem equally as good an investment opportunity, fundamental analysis can identify the superior option.

Fundamentally strong stocks can weather a storm. Stocks will always rise and fall, it’s unavoidable, but when everyone is panic selling during downtrend, you’ll know to hold strong. It’s always a good idea to have some fundamentally strong stocks in your portfolio.

Cons

Fundamentally analysis does have some drawbacks. There is no guarantee of profits by identifying an undervalued stock will not stay that way. In fact, it’s fairly common for undervalued stocks to maintain that poor performance for an extended amount of time. Also, sometimes company information is difficult to obtain in the public realm. That can lead to inaccurate fundamental analysis.

Fundamental analysis is also a time-consuming process and not really for those who are choosing to trade at CAPEX as a side hustle. It takes serious dedication and is certainly not something you can put half the effort into and expect quality results. Finally, most new CAPEX traders sign up based on the concepts of day trading. Fundamental analysis is a long fame though. Fundamental analysis tends to focus on stocks that will see results in 10 to 20 years.

 

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Fundamental Analysis vs Technical Analysis

Fundamental and technical analysis differ in their core purposes. Technical analysis purely leverages historical data of price and volume to determine trends, reversals, and price movements. Conversely, fundamental analysis measures the intrinsic value of an asset based on a number of different factors not limited to statistical price data. However, these two forms of analysis can be used together – such as learning about how different cryptocurrencies work before testing the market using tools for technical analysis for trading.

Practice with the CAPEX Demo Account

Now fundamental analysis can’t be conducted within the CAPEX demo trading account, but you can certainly act upon your research. Conduct some basic fundamental analysis and then execute a trade within the CAPEX demo account. The account is free to all CAPEX users and let’s traders’ practice with virtual funds. There really is no better way to put your fundamental analysis into practice and learn fundamental analysis for traders than by using the CAPEX demo trading account.

Conclusion – Trade with some of the best tools at CAPEX

Fundamental analysis forms the backbone of long term predictions on assets that are expected to see long growth over an extensive period of time. Unlike technical analysis that relies purely on historical data, fundamental analysis calls for research into many other factors such as business models, competition, product, or services quality, and many more. There are many tools for fundamental analysis and we, at CAPEX, offer unique insights for its users.

Before acting upon fundamental analysis, traders can always practice their buy or sell in the CAPEX demo account for free. Sign up today to use fundamental analysis on a great variety of tradable instruments at CAPEX.

Fundamental Analysis – FAQ

📊 Is fundamental analysis better than technical analysis?
👌 What is a business model?
📉 Can I trade stocks at CAPEX?
🎯 Where can I find good stocks to trade?