Investors are exposed to fundamental information and various research reports every day. Many experts give you an analysis of the relationship between supply and demand in the market and the macroeconomic environment every day, but the trading results of investors have not changed much. Why? Because investors don't know how to use fundamental analysis. In fact, for ordinary investors, the characteristics and functions of fundamental analysis are not clear at all. Most of them either blindly follow or refuse fundamental analysis. If so, the fundamentals are naturally almost meaningless to them.
How should we position the role of fundamentals in trading?
Fundamental analysis generally contains a lot of data and charts, and the data in a good report is not only comprehensive, but also quite accurate. Most of them are collected by researchers themselves, and some even come from their own investigations in industries or fields. Through the analysis of a large number of data and charts, researchers will come to a conclusion that the market is more likely to rise or fall in the future, that is, they predict the future of the market through the analysis of a large number of data and charts. The report written in this way is definitely valuable and will be recognized by industry experts or scholars, and naturally it will be recognized by most investors. In fact, we recognize not only this report, but also the method and spirit of this analytical research, because it is by this analytical thinking method that human beings can develop to today's level. Therefore, many investors will naturally use this analytical thinking method to trade, but he will soon find that it seems difficult to do it in trading, and the market trend often runs counter to the fundamental analysis he got, and also runs counter to the analysis of many experts! This is really confusing! Why? Because he doesn't know that the research report can be recognized by experts and scholars, but it is difficult to determine whether it can be recognized by the market. The market is the only authority and referee!
Many people predict the future of the market through fundamental analysis. They always think that the future direction of the market can be obtained by studying the fundamentals. They mistakenly believe that the role of fundamental analysis is to predict the future of the market. They mistakenly think that they can grasp the future by mastering a lot of fundamental data. I think this is a fundamental mistake. Such researchers will live in pain all their lives, because they are doing something that can never be realized-predicting the future. Maybe they are doing well in a certain market, and there are many such examples, but no one or institution can always make a correct judgment on the market through fundamental analysis, otherwise those large investment funds in the international market will not conduct two-way transactions. We should know that the research power of large investment funds is stronger than that of any domestic company. If they can know the future direction of the market through fundamental analysis, isn't the profit of unilateral trading much higher than that of two-way trading? Fund managers are not fools. I'm not saying that fundamental analysis is useless, but that the function of fundamental analysis is not to predict the market. Its function is more: to tell us the reason of market price fluctuation, so that we can know and understand the market more clearly, and not be confused and afraid of the rise and fall of market price because we know nothing about the fundamental situation. Fundamental analysis does not have the function of predicting the future direction of the market, but its function is imposed on it by our desire for profit. Fundamental analysis only tells you objectively what happened in the market and how the market price reacted. In some cases, we can't even fundamentally find the reason for the price rise and fall, because:
1, no one can fully and timely grasp the fundamental situation. Fundamentals include many factors, such as supply and demand of commodities, domestic and global economic conditions, policies, politics, military and security, as well as weather and natural disasters. It can be said that not only no individual or even no organization can fully understand the fundamentals, but we can only say that those who know more know less, let alone know in time. There will always be fundamentals that affect the price but you don't know, so the fundamental information you have will never be comprehensive. Incomplete and untimely information is wrong information for trading, because the information you have may not bring you profits, but what you don't know will often hurt you. There are often quotes in the market that you can't understand, indicating that there are new changes in the market that you don't know. There is always something in the market that you don't know.
2. The fundamentals themselves are dynamic, not static. Future changes in fundamentals are as unpredictable as market prices. The future market price is determined by the future fundamentals, not by the current fundamentals, so we can't analyze and predict the future dynamic market with the static fundamentals we have at present. Many people often say: the fundamentals are very bullish, why is the price falling? The price has fallen below the cost price. Why is it still falling? The fundamentals are good, but why don't prices go up? He made the mistake of using static fundamentals to correspond to dynamic market prices. He always believes that this causal relationship does exist fundamentally, but the crux of the problem is that this causal relationship really exists only after you have mastered the fundamental information comprehensively and timely.
The change of fundamentals can never keep up with the change of market price. In fact, it's not that changes in fundamentals can't keep up with changes in prices, but that investors can never keep up with changes in market prices. The change of market trend must be caused by the fundamental change of supply and demand in the market itself or the whole economic cycle, and the operation of funds can not change the market trend. However, whenever there is a trend change in the market, the fundamentals we know are still the original trend direction, and the market has changed direction, but investors still regard it as an adjustment because the fundamentals have not changed! Generally, when the price returns to 1/3 or even 1/2, we will start to worry about whether the fundamentals have changed. Has the market turned? Specifically, spot enterprises feel very uncomfortable, and the high positions of futures investors have been deeply locked. At this time, reports of fundamental changes in various fundamentals will appear. For example, this year's soybean and cotton market is such a typical example.
These are the shortcomings of fundamental analysis, or the disadvantages caused by improper use of fundamentals by investors. In fact, fundamental analysis has its own advantages, that is, the fundamental situation will not change easily. Once the market forms a certain trend, the trend will not end easily, and it will run for a long time, that is to say, the nature of the fundamentals is relatively stable and will not change every day like the market price. Because any upward trend must be caused by the bullish bear potential. Long-term bear potential leads to the reduction of supply, the shrinkage of production capacity and the reduction of capital investment in this industry. This process is gradually formed. This state will continue until a certain period, and the market suddenly feels that the supply is in short supply. At this time, the price will start to react first, that is, it will rise. However, the increase in prices will bring about an increase in profits, and enterprises will start to increase investment. It is by no means a matter of days from the beginning of investment to the launch of products. Therefore, as long as the fundamental changes lead to the beginning of a new trend, we can think that the trend will continue. At this time, if we cooperate with some simple technical tools, we can make good use of fundamental research results and form real trading profits, which is the most valuable place for fundamental analysis.