Fundamental analysis is a method of evaluating securities, commodities, or currencies by analyzing underlying economic, financial, and qualitative factors that affect intrinsic value. This approach examines supply and demand fundamentals, economic indicators, company financials, industry trends, and macroeconomic conditions to determine fair value and identify trading opportunities.

Fundamental analysis contrasts with technical analysis by focusing on economic drivers rather than price patterns and charts. For commodities, fundamental analysis includes weather patterns, inventory levels, production costs, and consumption trends. For currencies, it encompasses interest rates, inflation, trade balances, and political stability. Long-term investment decisions often rely heavily on fundamental analysis.

Real-world example: A fundamental analyst studies copper demand from construction and electronics industries, mine production capacity, and Chinese economic growth to conclude that copper prices should rise, leading to long positions in copper futures.