📘Lesson 6: The Fundamental Analysis School in Trading (Fundamental Analysis)

After covering technical analysis in previous lessons, it’s time to shift our focus to another equally important school: Fundamental Analysis. This approach gives traders a deeper understanding of the market and helps them make decisions based on real-world factors—not just candlestick patterns.

📌 What is Fundamental Analysis?

Fundamental analysis is a trading method based on studying economic, financial, and political factors that affect the value of a financial asset—whether it’s a cryptocurrency, stock, or fiat currency.

In simple terms, it answers the question:

"Why might the price go up or down?"

Rather than "When?"

🔍 Fundamental Analysis in Cryptocurrency:

Unlike stocks, crypto projects don’t have financial statements. Instead, we look at:

Project Purpose: Does the token solve a real problem? Is it needed?

Founding Team: Do they have experience and transparency? Have they launched successful projects before?

Roadmap: Is the project actively developing and meeting its milestones?

Partnerships: Are there collaborations with major companies or institutions?

Token Supply & Demand: Limited supply (like BTC) is often seen as positive.

News & Adoption: Institutional interest, exchange listings, and real-world usage.

Example: When BlackRock announced its intention to launch a Bitcoin ETF, BTC surged due to growing institutional confidence.

🧠 On-Chain Analysis (Crypto-Specific)

This involves analyzing data directly from the blockchain:

Number of active wallets

Token balances held on exchanges (decline suggests more holders)

Network strength (e.g., Bitcoin’s hash rate)

Transaction volume and activity levels

٠This data is available through platforms like Glassnode or Santiment.

📰 How Global Events Affect Markets

Fundamental analysis also includes macro factors, such as:

Interest rate decisions from central banks

Inflation reports (CPI, PPI)

GDP and unemployment data

Wars, elections, sanctions, or major political events

Example: During financial instability or war, investors often seek safe havens like gold or Bitcoin, causing their prices to rise.

📈 Fundamental Analysis in Stocks

In the stock market, analysis focuses on company performance:

Revenue and profits

Debt levels

Future innovation or product launches

Quarterly earnings reports

Management and company reputation

Growth projections

Example: If Apple reports earnings that beat expectations, its stock usually rises.

💱 Fundamental Analysis in Forex

In the foreign exchange market, currency strength is influenced by:

Interest rate changes

Central bank policies

Economic indicators like unemployment, trade balance, and PMI

Political stability or risk events

 Example: When the Federal Reserve raises interest rates, the US Dollar often strengthens against other currencies.

 ⚠️ Downsides of Fundamental Analysis

 Despite its power, fundamental analysis has some challenges:

Doesn’t provide exact entry or exit points

 Time-consuming and requires deep research

 Sometimes the market reacts unexpectedly to news (“Buy the rumor, sell the news”)

🧠 Why Should You Learn It?

Fundamental analysis is essential for anyone investing in the medium to long term. It helps you:

Distinguish between real and hype-based projects

Make well-informed investment decisions

Avoid getting caught in speculative bubbles

In bull markets, everyone seems to win. But in bear markets, only those with strong fundamentals survive.

✅ Summary:

Fundamental analysis offers a realistic and data-driven view of the market. It doesn’t rely on chart patterns—it relies on logic, research, and facts. Whether you're trading crypto, stocks, or forex, this school of analysis will elevate your awareness and reduce random decision-making.

Always start by asking:

"What gives this asset real value?"

If you can answer that, you’ll know why and when to invest—and what to avoid.

I hope you’ve found these lessons helpful so far.

See you tomorrow at the same time with a new lesson.

If you have any questions, don’t hesitate to ask — I’ll respond to everyone.

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