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The main difference between the fundamental and technical analysis is that the fundamental analysis is based on the assumption that the market prices are a reflection of demand and supply that depend on the fundamental factors of the economy. Fundamental analysis deals with the situation assessment from the point of view of political, economic and financial-credit policy. In general, the fundamental analysis identifies four groups of factors directly affecting the market: economic, political, rumors and expectations and force majeure circumstances.

People who use the technical analysis argue that you should not look for a reason for the changes in exchange rates and it is sufficient to analyze the prices themselves. It is assumed that it is impossible to find the cause for changes before the market itself includes it in the price. In most cases, technical analysis deals with shorter time intervals, from minute to weekly. A fundamental analysis is almost useless for short-term trading, which means that it imposes restrictions on the amount of your funds. You simply may not have enough money for current losses on an open position, which are possible when trading on medium-term trends. However, if the aim of the analysis is to forecast medium-term and long-term, then it becomes necessary to conduct research on the internal, underlying causes of changes in exchange rates. Only this type of analysis will provide an opportunity to assess the prospects for the supply and demand dynamics. In addition, this approach will give an investor the opportunity to consider avoid short-term fluctuations - market noise.

By definition, market fundamentals consist of the qualitative and quantitative data that are partly responsible for the economic prosperity and the following financial estimate of a security or currency. Analysts and traders interpret these fundamentals to work out an estimate as to whether the underlying asset is seen as a beneficial investment. Here are the most important fundamentals that classify securities and simplify the process of creating a portfolio that has the necessary characteristics.

1. Dividend yield. This is an indicator that demonstrates the current yield of certain shares. To calculate this indicator, you need to take the dividend amount for the stock and divide it by the current market price of the security itself. An increased dividend yield indicates the degree of attractiveness of certain shares.

2. Earnings per share. Any shareholder, as the owner of the company, is interested in what kind of profit they can get after all interest payments and taxes on the basis of shares they own. For EPS calculation, it is necessary to take the indicator of the company's net profit and divide it by the number of shares in circulation. The EPS is usually represented by a real figure in the currency equivalent and can be compared with the size of the dividend per share.

3. P/E ratio - this indicator allows you to see a ratio of earnings per share to its current market price, which is called earnings multiple. The main purpose of this coefficient is to identify the overvaluation or undervaluation of certain securities. Thanks to it you can determine exactly how many years the company will need to fully pay back the price for its shares. The ratio does not give you price information.

It should be noted that in order to make investment decisions with this indicator, it is necessary to calculate the value of the industry average P/E ratio and only then to conduct a comparative analysis of the ratio of a specific company with an average industry index. Only companies operating in the same industry with a similar structure of cash flows and accounting systems can be subjected to a comparative analysis.

If the value is higher than the index of the industry average, then the stock is overvalued and it needs to be sold and vice versa. But it is necessary to be as cautious as possible since a high P/E ratio may indicate a high on part of investors, which means that they are particularly interested in buying these assets. If there is a low P/E ratio, accordingly, investors' interest is understated and the asset's potential is significantly limited.

4. Net asset worth. First of all, this is a cost factor that allows you to determine the company's basic net worth per share. The calculations are made by dividing the net asset value by the number of shares in circulation. To determine the minimum threshold for the value of shares in most cases, use the NAV indicator for one share.

5. Alpha coefficient is an indicator that demonstrates the degree of risk. The coefficient that shows a positive value is additional reward for an investor for the risk of purchasing these shares. Consequently, the higher this indicator, the more attractive the asset is relative to the market. It is possible to calculate the average yield of the whole portfolio using a formula due to the alpha coefficient.

6. Beta coefficient allows for a comparative analysis of the relative changes in the shares yields compared with the indicators of the market's return. More simply, this ratio reflects the impact of the market on changes in portfolio returns. Also, you can find out the quantitative ratio both between the exchange rates movements for this stock and, in general, the movement of the stock market.

The value of ≥ 1 means that there is a big asset risk in relation to the market; for the value of ≤ 1 the risk is much less. A negative beta indicates that there is an inverse correlation between the exchange rate and the security index. And this means that  = -0.5 with the10% index falling will result in the price growing by as much as 5%.

The main drawback of the fundamental analysis is its complexity. It is quite simple to trace a dozen of correlations caused by a change in one single fundamental indicator with the appropriate skills. But when there are 50 fundamental indicators, each of which has its own cause-effect relationships that contradict each other or are reflexive, then you will already need a small research and development center. For this reason, according to various estimates, only 10-20% of traders use fundamental analysis in the decision-making and most of them understand it quite superficially.