What is meant by fundamental analysis is that this type of analysis focuses on a business financial statements. So what is the process of fundamental analysis?
Usually, the fundamental analyst looks to analyze the business earnings, assets, liabilities and other financial parameters.
The analyst value of the company to its current price to forecast a future valuation and price. A trade decision is made from the forecast of the analysis, the fundamental analyst buys or sells if the company is undervalued or overvalued.
When a fundamental analysis is applied to other securities than stocks, example forex or futures, it focuses on the overall state of the economy.
Parameters considered include among others interest rates, production, earnings, employment, GDP, housing, and manufacturing.
The importance of fundamental analysis and a good measure when you should use fundamental analysis is when your investment period is three months or longer.