Time Crunch Trading

If you were to ask most market participants what drives prices and creates trends they would tell you it’s fundamentals. Later in this chapter we will go through an explanation of what fundamentals are for the various markets. As a starting point definition, though, we can call them the factors which define supply and demand.

All of price movement in the markets comes down to the supply-demand equation. More demand equals higher prices, while weaker demand means lower prices. More supply means lower prices, while scarcity leads to higher prices.

Let’s use oil as a current example. Prices have risen dramatically in recent years. At least part of that has to do with increased demand coming from increased industrialization – and therefore increased energy demand – in places like China.
Fundamental analysis is the process by which one evaluates the supply-demand situation for a market in an attempt to determine a value or expected value – or in some cases a comparative worth. This methodology is something which can be applied to any market in one way or another.

At the top level, when looking at broad measures we often hear of fundamental analysis being referred to as economic analysis. Those folks who do so sometimes reserve the actual “fundamental analysis” term to application in terms of stocks. The same ideas are put in to play, though, so we won’t get too caught up in the differentiation.

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