Part 0, Part 1, Part 2
Welcome
Readers,
As I
said in previous parts that we will see how to read different sensex charts to
determine the probability of making correct assumptions. Before we apply any strategy to pick a
particular stock it is common to do either technical analysis or fundamental
analysis or for sound investment – both.
So
in this post I just make an attempt to bring one idea of what is technical analysis
and fundamental analysis.
Going
in detail, I can say these two are quite opposite, how? Technical analysis looks
at price moments of stock in chart and estimates the future stock price
movements. Whereas fundamental analysis is based on the economic factors of
balance sheet, income statements, price ratios etc., ultimately in fundamental
analysis tries to identify whether the company is potential for sound investing
or not !! Technical analysis is completely
different to fundamental analysis, it assumes that all fundamentals included in
the stock and then go for analyzing the price moments of stock in chart.
Hope
I make you clear on two different aspects, at the same time I think I made you
confused. isn’t it!!
Yes,
now in most of us should have raised a question that which one to go for – in picking
a particular stock?
Fundamental
Analysis? , Technical Analysis?
Fundamentals
are very important, without fundamentals market would not move. It gives a bird
view of a company for understanding the balance sheets, income statements, Changes
in management, environmental factors, Competitors strategies etc., by
considering all these factors it gives a predicted value of future cash flow.
Technical
analysis starts with assuming all the fundamental factors included in stock and
then go for identifying the trends in price moments and volumes to make a sound
decision on predicting the future stock price.
Few tips
got from experts:
If
you are planning to invest for a longer period then it is better to go for
strong fundamental analysis.
Suppose
if you are expecting returns in short period of time (say 1 year) then go for
fundamental analysis initially and at the time you feel to trade go for
technical analysis for better returns.
If
you want immediate returns right after your investment then go only for technical
analysis, i.e. trends in price moments and volumes.
*As
the period increases the fundamentals should be strong *
That’s
all for today
Have
a blessed day
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