Chartedge : Technical Analysis Institute
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Introduction : 7 Key Difference Between Fundamental and Technical Analysis
When it comes to trading or investment, a trader or investor use to methods to analyze a stock or asset – fundamental analysis and technical analysis. It serves as a guiding pillars for investor and traders. While the purpose of both is to find earning opportunities but they are contrast in strategies and techniques. In this article “difference between fundamental and technical analysis” you will get all the insights.
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Fundamental Analysis
If you are looking for the difference between fundamental and technical analysis then your search ends here. Fundamental Analysis means studying the values of a security asset or stock by evaluating its underlying factors. This method searches deep into a company’s financial health, analyzing its financial statements, earning reports, cash flow, and balance sheets. In this analysis, analysts assess various qualitative and quantitative aspects:
Key Elements of Fundamental Analysis:
- Key Elements of Fundamental Analysis:
Financial Statements: It consists study of revenue, assets, liabilities, and expenses to measure the company’s performance.
Economic Indicators: It consists of a study of macroeconomic factors that influence a company or industry like inflation, GDP(Gross Domestic Product), National Income, and Unemployment levels.
Competitive Positioning: This study involves competition in the market and the company’s positioning within the industry.
Management and Governance: This is also considered an important factor which includes the study of leadership, company management, strategic planning, and corporate governance practices. - Technical Analysis: The Study of Chart and Its Interpretation
On the other hand, technical analysis is the study of past market data and statistical trends. Initially, the historic price movements and trading volume are studied. This method assumes that historical price data can predict future market movements. - Key Elements of Fundamental Analysis:
Charts and Patterns: By studying charts and their patterns trends, support, and resistance levels are identified with the help of various charting tools.
Indicators and Oscillators: To analyze market momentum various tools like moving averages, Relative Strength Index(RSI), Stochastic, and MACD (moving averages convergence and divergence are used.
Volume Analysis: Trading volume is studied to identify strengths and weaknesses in the price movement. - contradictory Perspectives: Fundamental vs. Technical Analysis
Fundamental Analysis: It is focused on measuring the intrinsic value of an asset or security on its underlying factors and economic conditions.
Technical Analysis: Its main purpose is to forecast the future price movement of assets by studying historical market data, chart patterns, and trends. - Timeframe:
Fundamental Analysis: This study is taken into consideration by an investor when his view is a long-term investment that is completely focused on the company’s growth, stability, future plans, and projects over an extended period.
Technical Analysis: It is often used for short-term analyzing shorter time frames for trading opportunities. - Tools and Data:
Fundamental Analysis: Relies on financial statements, economic indicators, and qualitative data.
Technical Analysis: Utilizes charts, patterns, and quantitative market data. - Flexibility:
Fundamental Analysis: It is based on long-term assessments and it is not adaptive to rapid market changes.
Technical Analysis: It is more adapted to short-term market fluctuations as it concentrates on immediate price movements.
Conclusion:
In short fundamental and technical analyses offer different methods for investors to perceive and act upon market information. While they give different methods and approaches, their inclusion gives a comprehensive understanding of market dynamics which helps investors or traders to make informed decisions. I hope you understand the difference between fundamental and technical analysis.
If you find our guide “difference between fundamental and technical analysis” helpful, don’t forget to post comment! For more information please visit our websites www.chartedge.co.in. Must know websites for Indian stock market www.nseindia.com and www.bseindia.com
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