Comparison Between Stock Market Technical Analysis And Fundamental Analysis

By Author: Jemsh Smith
Total Articles: 39
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There are typically two schools of thought when it comes to the bourse: you have stock market technical analysis and the other one is fundamental analysis. The two approaches couldn’t have been more different although interestingly enough, they have more commonalities if you are willing to go beyond the muckraking.

Technical analysis

This type of approach skips on the company’s finances and instead focuses solely on the price fluctuations. Its advocates believe that all you need to know is already integrated in trends and patterns of the indices. In order to spot these trends, they use complicated algorithms and the most advanced forex or stock trading software that will collate historical data and input it into the system. Each depression and expansion is reflected in the prices which are updated religiously. If the company has a history of performing well—regardless of any new information that cause its stocks to plunge—it’s still going to be a good bet in the future. While volatility would scare ...
... most people, proponents of stock or forex trading analysis actually welcomes it because that’s how they make their profits.

Fundamental analysis

Now, fundamental traders don’t rely on the market movements alone. They base their decision on the data that reflects the company’s financial standing or mutual fund analysis and add that to other non-financial data like industry news, trading partners, and even the political condition of the locality where the company is doing business in. For example, if the head honcho of company A dies suddenly, you can expect the value of the company stocks will falter. But if the similar company merges with company B, which has the financial resources to bring company A to another level, you can expect stocks to skyrocket.
Naturally, this takes an enormous amount of work and focus because you really need to soak up all the information that comes up about the company you are interested in. You have to factor in the credit risk, market projections, internal management structure, organizational chart, and stock valuations to make sure that if the company is doing well, it’s not a fluke.

A perfect blend

But really, there’s no law against using both approaches to better position you in the stock or forex market. Technical analysis is often time seen as the preference of the impatient people because of its short-term character. Fundamental, meanwhile, can be likened to the turtle in the children’s parable “The Tortoise and the Hare.” You may move slower but you are going to win in the end. But by mixing both systems and maybe purchasing a stock or forex trading analysis software, you can choose from among the companies that are doing well based on industry data then using the tools in technical analysis to verify the potential of that company.