Fundamental vs. Technical Analysis

Fundamental analysis and technical analysis, the major schools of thought when it comes to approaching the markets, are at opposite ends of the spectrum. Here are the differences between the two. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

| Investing Basics 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 Strategies for Beginners Technical analysis helps traders and investors navigate the gap between intrinsic value and market price by leveraging certain techniques. Read Now » Technical Vs. Fundamental: Friends or Foes? Experienced investors debate which one—fundamental or technical—provides higher returns. Read Now » Debunking 8 Myths About Technical Analysis Here are common myths about technical analysis. Read Now » CONNECT WITH INVESTOPEDIA Email sent to: geezers.mail@gmail.com To update your newsletter preferences or unsubscribe, click here. 114 West 41st St, floor 8 New York NY 10036 © 2020, Investopedia, LLC, All Rights Reserved | Privacy Policy