Trading with Charts for Absolute Return

FUNDAMENTAL ANALYSIS

This section begins with an overview of indicators and styles of investment, then discusses the pros and cons of fundamental data analysis as a basis of investment decisions in the direction of absolute return.

Basic Indicators

A company trying to launch a new product will first try to determine its chances by doing market research and customer behavior research before it starts an advertising campaign. Stock analysts follow essentially the same principle. A person who does not understand the past will not learn from future developments, either. It is simply not enough to watch interest rates, dividends, rate of inflation, or sales earnings among other fundamental factors.

An analyst combining the indicators of the general economy, industrial groups, and competitive advantages would be much more successful. Fundamental analysis is based on past and present data in order to make financial forecast possible. The indicators for the fundamental analysis can be divided into four categories.

Category 1 consists of indicators for determining general economic development, such as productivity of the economy, gross national product (GNP), wholesale price index, inventories, production at full capacity, investments, balance of trade, state budget, consumer behavior, and inflation.

Category 2 consists of indicators for determining monetary development in the economy, such as trends in interest rates, growth rate of the money supply, free credit balances in brokerage ...