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fundamental vs technical


Anna Williams

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Both are methods used to predict the potential price momentum/movement of a stock.

Fundamental Analysis for a Stock:

In fundamental analysis, you focus on two main aspects: a) checking the company's financials for any issues, and b) assessing the future demand trend for the company's product in the market.

Analyzing the financials of a stock involves reading the annual statement, particularly the balance sheet, profit and loss statement, and cash flow statement.

The key indicators to watch are:

- Balance Sheet:

Compare the company's cash reserves to its liabilities. Higher cash reserves and lower debt indicates financial stability.

Profit/Loss Statement:

Evaluate the company's revenue generation and its ability to convert revenue into profits.

Cash Flow Statement:

This provides a clear picture of the actual money the company has in its accounts and helps identify any irregularities.

Industry Demand:

Analyze the demand trend for the product or value that the industry is producing/generating in the market. Assess whether the demand and market are expected to grow.

Competitive Positioning:

Compare the company with its peers to determine its ability to capture market share.

 

In short, if the demand for the product/industry is expected to grow, the company has the potential to capture sufficient market share, and you can acquire the stock at a favorable valuation, then it is considered a good investment.

 

P.S: there are also some ratios build to judge a company, I don't remember them, you check the google. But I have mentioned the core things above, for fundamental analysis. .

Technical Analysis for a Stock:

This involves analyzing the price action depicted in charts, observing support and resistance levels, and studying how charts have behaved in the past.

Tools used in technical analysis include:

  • Reading and observing candlesticks and candlestick patterns.
  • Using indicators.
  • Identifying chart patterns.
  • Analyzing trading ranges.

 

This is the complete guide on Technical Analysis with all the chart patterns, and more; https://www.asktraders.com/learn-to-trade/technical-analysis/

Edited by Rishabh Tyagi
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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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Hi, thank you for your question! 

Technical and fundamental analysis are two of the most commonly used analysis methods when it comes to all forms of trading. These two are completely different and are relying on completely different aspects of trading data in order to generate their results. In the end, both of them have a common goal, to predict, as accurately as possible outcomes of trade moves, and price movements.

The fundamental analysis determines the value of the stock by intrinsic value. This value encompasses everything from the overall economy and industry conditions to the financial condition and management of companies, earnings, expenses, assets, and liabilities.

On the other hand, technical analysis derives value from the stock’s price and volume. Without paying attention to all aspects that fundamental analysis is paying to because technical analysts think that it is all included in these two aspects. 

Technical analysts do not attempt to measure a security's intrinsic value, but instead, use stock charts to identify patterns and trends that suggest what a stock will do in the future.
 

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8 hours ago, Rishabh Tyagi said:

Both are methods used to predict the potential price momentum/movement of a stock.

Fundamental Analysis for a Stock:

In fundamental analysis, you focus on two main aspects: a) checking the company's financials for any issues, and b) assessing the future demand trend for the company's product in the market.

Analyzing the financials of a stock involves reading the annual statement, particularly the balance sheet, profit and loss statement, and cash flow statement.

The key indicators to watch are:

- Balance Sheet:

Compare the company's cash reserves to its liabilities. Higher cash reserves and lower debt indicate financial stability.

Profit/Loss Statement:

Evaluate the company's revenue generation and its ability to convert revenue into profits.

Cash Flow Statement:

This provides a clear picture of the actual money the company has in its accounts and helps identify any irregularities.

Industry Demand:

Analyze the demand trend for the product or value that the industry is producing/generating in the market. Assess whether the demand and market are expected to grow.

Competitive Positioning:

Compare the company with its peers to determine its ability to capture market share.

 

In short, if the demand for the product/industry is expected to grow, the company has the potential to capture sufficient market share, and you can acquire the stock at a favorable valuation, then it is considered a good investment.

 

P.S: that there are various ratios and metrics used to assess a company's financial health, but the core aspects mentioned above cover the fundamentals of analysis.

Technical Analysis for a Stock:

This involves analyzing the price action depicted in charts, observing support and resistance levels, and studying how charts have behaved in the past.

Tools used in technical analysis include:

  • Reading and observing candlesticks and candlestick patterns.
  • Using indicators.
  • Identifying chart patterns.
  • Analyzing trading ranges.

 

This is the complete guide on Technical Analysis with all the chart patterns, and more; https://www.asktraders.com/learn-to-trade/technical-analysis/

soo details. great info 

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