The most important part of learning swing trading is learning about the basics of the markets and how to trade.
It’s very difficult to understand and understand how the market works without taking the time to know the basic fundamentals of how the markets work.
The following sections of this site will give you a good understanding on how to trade.
There are 2 main components to trading – fundamentals and fundamentals-focused strategies.
I always find it interesting when we talk about fundamentals. Here are some common concepts we talk about.
A “fundamental index”
A “fundamental index” is a single index that is the best measure of fundamental factors.
I usually refer to this as the “fundamental index”.
The fundamental index is not a “market-clearing price index” – or even a “market-moving index” – which is the term you hear all the time nowadays.
Instead, “fundamental index” should not only be a good measure of fundamentals, but also a good measure of risk-return factors and opportunities.
For some simple examples, you’ll see some popular fundamental indices.
I’ll explain these indexes in much more detail in a separate section of this website, but generally, they can be used to illustrate some of the most important aspects of trading fundamentals.
For more information on the foundations and history of various factors that are known as “fundamental factors”, please click here.
So, let’s see the basics of the fundamental index…
What is the fundamental index?
In order to learn about fundamentals, let’s take a look at the fundamental index for the year 2000.
As you can see, these stocks were “fundamental” – meaning they were all about the same fundamental factors.
We can assume that some of the “fundamental factors” were more significant (for example, the US economy at this point in time was already showing signs of stress), while others were less so such as global inflation and energy prices.
These factors are often used to calculate the fundamental index. Let’s examine how these factors work.
Why are fundamental factors important?
The basic assumption and purpose of fundamental indicators like the fundamental index is that the stocks are more similar to one another than to the index itself.
That’s right – fundamental indicators look at stocks within a broad segment of a market (or an industry) and suggest how similar those stocks are to the