Many investors and traders fail in the stock market because they do not study the company and industry before investing their money. That is why stock market analysis is so crucial to get insights and understanding into a company’s stock and make better decisions in online investing and trading in the stock market.
📈📉 What is Stock Market Analysis?
Stock market analysis is the evaluation of a particular trading instrument (for eg. Stock), an industry / sector, or the market as a whole. Stock market analysis helps determine the future activity of an instrument, sector, or market.
There are broadly two types of analysis i.e Fundamental & Technical.
In this article we will compare Fundamental Analysis vs Technical Analysis and how are they used to evaluate certain factors that can influence the price and performance a company’s stock. Before comparing lets understand the basic…
What is Fundamental Analysis?
Fundamental analysis may be described as a study of the elements that may influence an company’s stock prices in the future. Financial statements, industry, managerial practices, and other aspects are examined in the basic analysis. For assets that will be kept for a longer period, fundamental analysis is useful. Fundamental analysis takes into account both historical and present data. Fundamental analysis determines an organization’s inherent worth to determine if a stock is overpriced or underpriced. Fundamental analysis is solely utilized for investment purposes.
What is Technical Analysis?
Technical analysis examines prior patterns, charts, and trends in an attempt to forecast an organization’s price fluctuations in the future. In other words, technical analysis is a strategy for predicting the future price of assets using charts to discover trends and patterns. For assets held for a shorter time, technical analysis is useful. The technical analysis primarily considers historical data and is used purely for trading purposes. The goal of performing technical analysis is to determine the best timing to enter or depart the market.
Difference Between Fundamental and Technical Analysis
Here are 11 key differences between fundamental and technical analysis.
|Fundamental Analysis||Technical Analysis|
|Fundamental analysis is used to determine the inherent worth of a specific company.||Technical analysis is used to forecast future price patterns.|
|The investing function is handled by fundamental analysis.||The trading function is handled by technical analysis.|
|Fundamental analysis is conducted by analyzing many economic elements.||Technical analysis is undertaken by examining price movements and patterns displayed on charts.|
|Fundamental analysis is done by long-term traders.||Technical analysis is done by swing and short-term traders.|
|External news has little bearing on fundamental analysis.||External news influences technical analysis.|
|Economic reports, industry stats, financial statements, management procedures, news events are used for fundamental analysis.||Chart analysis is used for technical analysis.|
|The fundamental analysis employs the ideas of return on assets and returns on equity.||Technical analysis uses price data and DOW theory.|
|Fundamental analysis considers both qualitative and quantitative elements (charts, moving averages, etc.).||Technical analysis focuses on price and volume.|
|Long-term investments require fundamental analysis.||Short-term investments require technical analysis.|
|Fundamental analysis looks at both previous and current data.||Technical analysis just looks at prior data.|
|Fundamental analysis is used to determine a stock’s worth based on economic variables.||Technical analysis is used to determine a stock’s price movement to anticipate future price changes.|
To Sum Up
As an investor or a trader, it is important that you perform stock market analysis before you start investing your money in the stock market. It can be time-consuming, but having an idea will prevent yourself from significant losses and make the right trades.
Now that you know the exact difference between the both, here are list of stock that you can look at…
- List of Nifty 50 Stocks
- List of Nifty Bank Stocks
- List of Fin Nifty Stocks
- Top 5 Banking Stocks in India
- Top 5 Pharma Stocks in India
- Top 5 EV Stocks in India
You can also read – How to Trade Effectively by Trading Directly from Charts?
Happy Analysing 📈
Disclaimer: This blog is not to be construed as investment advice. Trading and investing in the securities market carries risk. Please do your own due diligence or consult a trained financial professional before investing.