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Anna Williams

fundamental vs technical

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Hi Anna, thanks for asking.

These two concepts are actually the heart and soul of the entire investing and trading process. Almost all other categories, elements and analysis methods are based on these two general concepts.

Their common goal is that they are focused on determining the value of an asset in question. The big difference is how they believe that should be achieved. Fundamental analysis wants to calculate the natural or inherent value of the asset. Its focus is based on the company, the industry, and the environment it operates in i.e. all fundamental aspects.

As such, it analyzes all elements that have an impact on the overall value of an asset e.g. earnings, expenses, assets, revenue, cash flow, liabilities etc. On the contrary, technical analysis believes that all fundamental factors have been taken into account and have contributed to forming the current asset price. 

Therefore, we should focus on the prior price action and historical data in order to calculate the stock value, future trends, and therefore find attractive market opportunities. In essence, technical analysts believe that the market price represents the value of a stock. 

Despite the fact that these two concepts are different in their nature, both can work in a complementary fashion, combining its strengths to generate insightful data about the fundamental and technical elements of a company and its market performance.


 

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