Fundamental vs. Technical Analysis

Technical analysis and fundamental analysis are the two main schools of thought when it comes to analyzing the financial markets.

Sharper Insight. Smarter Investing. Manage Preferences FUNDAMENTAL VS TECHNICAL ANALYSIS When you're assessing which style of investor you are, there are many questions that only you can answer. One is whether you are more of a fundamental trader or a technical trader. Fundamental trading techniques are the ones that most beginning investors start with. They are so called because they involve analyzing a company's "fundamentals" — that is, the kinds of basic quantitative and qualitative information you would find in a quarterly report. Examples of quantitative include a company's profits and losses, changes in share price, etc. Qualitative data would include things like a change in the company's leadership or a decision to change the company vision. It is certainly possible to invest using only fundamentals. Many investors, however, find technical analysis to be helpful. Technical analysts believe the past trading activity and price changes of a security are better indicators of the security's likely future price movements than the intrinsic value of the security. Based on careful interpretation of past trading patterns, technical traders try to predict future price movements. The technical trader employs an arsenal of technical indicators to analyze short-term price movements. Examples of common technical indicators include the Relative Strength Index and Money Flow Index, plus Stochastics, MACD and Bollinger Bands®. Most analysis involving charts of any kind would count as technical analysis. Typically (but not always), technical analysis is a short-term strategy, not a buy-and-hold strategy. Most investors do not rely solely on fundamental analysis or solely on technical analysis, but rather on a combination of the two, read on. Technical Analysis Technical analysts believe past trading activity and price changes of a security are better indicators of the security's likely future price movements than the intrinsic value of the security. Read More What is the difference between fundamental and technical analysis? The main difference between technical analysis and fundamental analysis is the use of financial statements to value equities. Read More Technical Vs. Fundamental Investing - Friends Or Foes? Do fundamentals drive technicals or the other way around? In the short run, strong fundamentals do not always indicate strong technical patterns or vice versa. Read More Debunking 8 Myths About Technical Analysis Investopedia exposes a few common myths about technical analysis. Read More Fundamental Analysis Get ahead of the market by understanding the true value of a stock and capitalize on its price. Learn fundamental analysis strategies and tools used by the most successful investing professionals. Enroll Now. You are currently subscribed as: techandgio.cpex@blogger.com Unsubscribe  |  Manage Subscriptions Investopedia, LLC, A Division of IAC. 114 West 41st St, floor 8, New York NY 10036 Copyright © 2018, Investopedia, LLC. All Rights Reserved Follow Us: