Difference between Fundamental and Technical Analysis
Basis |
Fundamental Analysis |
Technical Analysis |
---|---|---|
Meaning |
Fundamental analysis is used by investors to evaluate the intrinsic value of a security or stock. |
Technical analysis is a method employed by traders to forecast future price movements of stocks, currencies, or other financial assets based on past trading activity, primarily focusing on price and volume data. |
Objective |
It wants to see if a company is worth investing in for the long term, looking at its growth and how strong it is in its industry. |
The goal here is to figure out the best time to buy or sell a stock, focusing on short-term price movements and trends. |
Focus |
Fundamental analysis looks at a company’s financial health, like how much money it makes and its place in the industry. |
Technical analysis checks out how prices of stocks or other things have moved in the past to guess how they might move in the future. |
Data Used |
It uses stuff like financial statements, which are reports of a company’s money, and economic indicators, which show how the economy is doing. |
Technical analysis mostly looks at past price charts and trading volume, or how many stocks are being traded. |
Time Horizon |
People who do the fundamental analysis are usually thinking long-term about investments, looking at how a company might do over many years. |
Technical analysis is more for people who want to make quick decisions about buying and selling stocks, thinking about just the next few days or weeks. |
Fundamental analysis helps people decide if a stock is priced right based on how the company is doing financially. |
Technical analysis helps traders pick good times to buy or sell based on patterns in past prices and trading volumes. |
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Market Psychology |
Fundamental analysis looks at things like how a company is doing in its industry. |
Technical analysis checks out how people feel about a stock, like if they’re excited about it or worried. |
Tools and Techniques |
Fundamental analysis uses stuff like financial ratios and cash flow models to figure out how much a company might be worth. |
Technical analysis uses things like charts showing past prices, lines to show trends, and special indicators to guess where prices might go. |
Difference between Fundamental and Technical Analysis
Fundamental and Technical Analysis are methods used in financial markets to evaluate securities and make investment decisions. Fundamental analysis involves looking at a company’s core financials and economic factors to determine its value over the long term. On the other hand, technical analysis focuses on studying past price and volume patterns of security to predict future movements.