Before we go into the differences, it’s a good idea to outline a type of analysis that’s the same for both shares and forex (and indeed all other asset classes).
Broadly speaking, there are two main types of market analysis, technical and fundamental. We’ll focus on fundamental analysis in a moment, for now, it’s important to understand a few things about technical analysis.
Technical analysis is simply the study of price action on the chart. Technical analysts do not concern themselves with geopolitical news, economic data, or anything else other than what the chart itself says.
They believe that all information is either priced-in to the chart, or in the process of being priced-in, so they concern themselves exclusively with price action and use their own combinations of support/resistance levels, moving averages, and other technical indicators to determine the most likely path ahead for the asset’s they’re trading. Technical analysis was actually born in the US stock markets, so if you’ve been using this type of analysis to trade FX, gold, crypto, or anything else for that matter, your knowledge is totally applicable to the trading of shares.
Fundamental analysis, as you might expect, does differ between asset classes, because you’re dealing with the fundamentals of supply and demand, as well as the economic inputs and broader conditions that influence a specific asset’s value. For FX this may be interest rates and other economic data, for crude oil it tends to be inventories and new wells. In the case of shares, traders pore over the financial statements of the companies they are trading, which those companies are obliged to provide.
Fundamental analysts of stocks are interested in a company’s balance sheet, which details the business’s assets, liabilities and shareholder equity. They are also interested in company cash flow, which includes the cash generated from the business’s day to day operations, as well as any cash earned from investments, sales of assets, or borrowed capital.
Some of the metrics investors use to compare companies against each other are the price to earnings ratio (known as P/E, which compares the stock price to the company’s earnings), price to free cash flow, debt to equity, and revenue growth. These metrics are all available for all publicly traded companies and tend to be scrutinised around earnings season.