Fundamental Analysis-1

Back in old days,you'd call your broker to enter an order and then wait for your broker to phone back and report the fill price.But today the internet has changed everything.You can enter order online,have your orders filled within second ,and receive notification showing the order's price almost as quickly.Online brokers provide a vast information of research and trading tools like real-time streaming quotes,chart analysis and extensive order-entry capabilities.The wealth of online information that can help you improve your trading results is simply remarkable.But here are some of the things you have to do as your daily routine-

1.Monitor economic reports,Earnings reports,and Business news
2.Read analyst's reports,company reports to SEC
3.Research stocks,IPOs
4.Monitor market indexes,sectors
5.Managing your account

   You've probably heard the terms 'Bull market and 'Bear market'.To find out what they mean,you need to understand how economic cycles affect the stock market.

   A bull market is a market in which a majority of stocks are increasing in value and a bear market is a market in which a majority of stocks are decreasing.People who believe in these markets are known to be 'Bulls' and 'Bears'.Regardless of whether the bulls or bears are right,you can make money as a trader.The key:Identify the way the market is headed and then buy or sell into the trend.

    For this,you need to monitor market reports,market indicators as we already said.Everyday that you open your newspaper,you see atleast one story about how economy is doing based on various economic indicators.Popular indicators track employment,money supply,interest rates,housing sales,production levels,purchasing statistics,consumer confidence,and many other factors that indicate how the economy is doing.We focus on the ones that can provide you with the most help in making your trading decisions.The stock market is very sensitive to all these indicators.By knowing these,you can discover how the economy can be driven and how the market listen to political and monetary leaders speech.

Fed watch:

    Watching the Federal open market committee(FOMC) of the Federal Reserve and tracking what it may or may not do to the interest rates is almost a daily spectator sport.When Fed chairman Ben Bernanke speaks,the market listen.i.e, People look for indications of what the Fed may be thinking and what they are going to do with the interest rates.
     The key reason for you to be concerned: A change in interest rates can have a major impact on the economy and thus on how you make trades.An increase in rates is likely to slow down spending,which can lead to an overall economic slowdown.The raise of the interest rates is because the board believes the economy is overheated,which can results in inflation.On the other hand,the Fed fears an economic downturn,the board frequently decides to cut interest rates to spur spending growth.

Money supply:

    This is the key number to watch,because growth in money supply can be leading indicator of inflation in situations when the money is greater than the supply of goods.When more money than goods is around,prices are likely to rise and thus heats up inflation rate.

Inflation:

   Several key economic indicators point you toward ways of identifying the risk of inflation,and are Gross domestic product(GDP),Consumer price index(CPI),Producer price index(PPI),Retail sales data.

And we will discuss each of these indicators in next post...