The 3 Biggest Fundamental Trading Tricks

The 3 Biggest Fundamental Trading Tricks

Fundamental investment trading is one of the core philosophies for many investors. Fundamental investors rely on market news, company earnings reports, and other relevant events that can influence share prices and Market values for companies and indexes.

This article will describe three powerful tricks for developing a fundamental trading strategy that you can immediately integrate into your personal trading.

Choose The News

The phrase “buy the rumor and sell the news” has been championed by investors for well over a century. There is a famous example where Joseph Patrick “Joe” Kennedy, Sr. (JFK’s father), realized he should pull out of the market when a young shoe-shiner asked him if he was going to buy stock shares.

The invrse can also be true, especially when surprise announcements or unexpected market events drastically alter a company’s fundamentals. For example, Jack Dorsey made a surprise announcement that he was going to resign effective immediately as the CEO of social media giant Twitter. The market was shocked into action, and the shares jumped 10% on the news before settling at market close.

Since news is an essential aspect of fundamental trading, it’s vital to work with a brokerage that can keep up with you and the market. Download FBS MetaTrader 4 If you want a trading platform that enables you to keep up with market demand and grow as a Trader regardless of your experience level.

Pick A Side

Another vital aspect of fundamental trading is to choose which direction you want to invest – up, down, or sideways. If you are bullish on a particular stock, you should use one set of trading parameters to enter into a new position, such as industry benchmarks and executive leadership decisions. However, if you are bearish on a company or an industry, it’s essential to use parameters that will confirm or disprove your thesis.

If you do not know which way the market is heading and the fundamentals are hard to read, you may want to hedge your positions and focus on income trades such as spreads or long hedges.

Earn Your Returns

No conversation about fundamental trading could be complete without company earnings.  publicly traded companies are required to publish their financial performance either in quarterly, semi-annually, or annual earnings reports.

Earnings reports contain accounting information, how much each share of stock earned for that time period, and how the company’s general health is doing. Companies that are growing and performing well often outperform analyst expectations and may earn more per share than the market anticipated. Fundamental traders who are bullish on companies outperforming their stock performance targets often purchase shares before earnings are released or purchase call options if they do not want to commit excess capital to their trades.

Final Thoughts

Trading fundamentals can be as simple as reacting to market news or as complex as building an integrated financial model to create your own trading signals based on anticipated earnings and macroeconomic trends. By leveraging market data and trends, investors can build a blueprint that they can customize according to their goals and adjust according to how the market performs.