What is Fundamental Analysis?

Price shows you what happened. Fundamental analysis helps explain why. In this video, we break down how traders use real-world factors like inflation, interest rates, company performance, supply and demand, and market expectations to understand what really drives price movements.

Imagine you’re buying a house. You wouldn’t judge it by the asking price alone.

You’d look deeper, at the location, the condition of the property, nearby schools, transport links, and any future developments being built in the area. Those are the real factors that help determine what the house should actually be worth. 

Fundamental analysis follows the same idea, but in financial markets. 

It is a way of understanding the value of an asset by looking beyond the price and studying the real forces that drive value. These include economic growth, inflation, interest rates, company performance, and supply and demand. 

At the centre of this approach is one simple concept: every asset has a real value, while the market shows a price. 

Fundamental analysis is the process of estimating that real value, often called fair value or intrinsic value, and comparing it to the price you see on your screen.

If the price is below what you believe the asset is worth, it may be undervalued. If it is above what you believe the asset is worth, it may be overvalued. 

But fundamental analysis is not only about whether something looks “cheap” or “expensive.”

It is also about expectations, because markets move when views about the future change: where inflation is heading, what central banks might do next, or whether supply could be disrupted. 

So, going back to the house example, think of it like this: 

Price is the listing. Fundamentals are the inspection.

And when you learn to understand those underlying forces, you stop reacting to noise and start seeing what really drives markets.