Fundamental analysis focuses on past, present and upcoming economic news events and facts to forecast the future movement of the market. These may include interest rate, unemployment, inflation or GDP announcements. You will often see analysts then going into depth by analyzing what impact these events will have on the market or specific shares themselves.
By taking the stock pair of Google / Apple as an example, a financial analyst will look out for the report or earnings of either one or both of these shares in order to forecast the future market movement. This is important because for selecting certain stocks in a stock pair to be the better performer at expiry is what Pair Options trading is based on. So for Apple, you may want to listen to Apple CEO Tim Cook speak about a particular issue. In another scenario, you may want to pay attention to the quarterly earnings of Google to make a decision of which Pair Option to purchase.
Remember, when it comes to fundamental analysis – keep in mind both micro and macro-economics. A lot of the time, many analysts will have different interpretations about particular speeches and events, which means you will need to be enough of an expert to make an informed decision. Thus the best advice is to look at all the information that you have has a resource.
Fundamental analysis is one of the two forms of analysis used by traders to determine which contract to purchase. So once you understand certain aspects of the market and the future market direction of a particular underlying stock, then you are on your way to Pair Options success. The thing is that you will need some practice in trading Pair Options and with fundamental analysis in general.
You will need to be aware of the different events that are going on around the world. The comforting fact is Pair Options are market neutral, and a shocking news release will barely affect the comparative behavior of the stock pair as they are nearly always from the same industry, i.e. HSBC/ Bank of Scotland.
In reality, the fundamental analysis that a trader follows will be quite specific. As mentioned before, it may be a CEO’s speech or quarterly earnings of a particular stock that you may be following. As long as you stay on top of the relevant fundamental analysis, you will know which stock to choose in your preferred stock pair at the right time.