The desire to invest in the stock market is every customergewn`er of so many people to hurry to make the most favorable decision. The question is then how do you decide what stocks to buy or sell? And this is where two effective tools enter the picture: Technical Analysis and Fundamental Analysis.
Both are very popular among the investors and analysts to understand stock movements and market trends. But which one you pick will depend on your goals, your comfort with risk and your investing style. In today’s post, we’re going to dissect the fundamentals of both approaches, in layman’s terms, and help you understand which method is best for you.
What is Fundamental Analysis?
Fundamental Analysis is all about tearing apart a company for its true value. It includes considerations of such factors as a company’s financial healthy, performance, management, industry position and economic conditions.
This approach attempts to address questions such as:
- Is the company profitable?
- Does it have a lot of debt on its balance sheet?
- Are their revenues and earnings increasing?
- What are the growth prospects?
For instance, if you are evaluating a company such as Infosys, you will want to study its annual reports, income statements, debt, profit margins and future plans of growth. You will also compare it with competitors and consider the state of the IT industry as a whole.
This strategy is most often practiced by long-term investors who think the stock price will eventually reflect the company’s true value.
What is Technical Analysis?
Technical Analysis has not much to do with financial statements or a company’s general performance. It instead relies on charts, price patterns, trading volume and technical indicators to forecast the direction of stocks in the future.
Technical analysis holds that all known information is already reflected in stock prices. So, they analyze what the stock did in the past to predict what it might do in the future.
A few of the tools used in the process of technical analysis are:
- Moving Averages
- Relative Strength Index (RSI)
- Bollinger Bands
- mAINS (Moving Average of Normalized to SMP MACD Indicator)
- Support and Resistance Levels
This is a technique implemented by most short-term traders–intraday traders and swing traders–that want to take advantage of swift price movements.
Fundamental Versus Technical Analysis Of course, there is an army of investors who like to do analysis on businesses called “Fundamental Analysis”.
Key Differences Between Fundamental and Technical Analysis
| Feature | Fundamental Analysis | Technical Analysis |
| Focus | Company’s intrinsic value | Stock price patterns |
| Time Horizon | Long-term investment | Short-term trading |
| Tools Used | Financial statements, economic data | Charts, indicators, patterns |
| Objective | Identify undervalued/overvalued stocks | Predict short-term price movement |
| Suitable For | Long-term investors | Day traders, swing traders |
Which Tactic is Your Best Fit?
Now that you know the two approaches, let’s help you determine which is right for you.
Go with Fundamental Analysis if:
- You are a long-term investor.
- You are looking to accumulate wealth gradually over time.
- You would rather learn a company’s business, financials, and market trends.
- You have patience and don’t mind waiting for the stock to increase in value.
Choose Technical Analysis if:
- You’re looking for short-term trading or a fast buck.
- You like reading charts and markets.
- You’re confident making quick decisions that are based on patterns.
- You can tolerate risk and market fluctuations.
It’s worth noting that many successful investors employ a combination of each as well. They employ fundamental analysis to identify good companies and technical analysis to determine when it is best to enter or exit the market.
How a SEBI Registered Research Analyst Can Be Of Service To You
It’s not always easy to make the right investment decision, particularly for novices in the stock market. Find a job that’s why working with experts can make a big difference.
SEBI registered Research Analyst is a highly professional consultant is under the strict regulations and also has the qualifications to give a well-reasoned investment advice. The perspective of these experts are useful for both technical and fundamental analysis and can be used to make constructive decisions.
Whether you work with a SEBI approved stock advisor, SEBI certified investment advisor or a SEBI registered equity research firm, research will be data backed and follows highest degree of professional industry standards.
You can also benefit from:
- Custom portfolio strategies
- Regular stock market updates
- Risk management tips
- In depth stock analysis reports
If you pick SEBI registered advisory services, you’re going to follow an advice that’s been released with a registered adviser, who is licensed, governed, and should constantly have you profit in her or his thoughts.
Why Compliance Matters
Rumors, tips and making decisions based on emotions are never where investment advice comes from. Peace of Mind – Working with a SEBI regulated financial adviser. These individuals stick to professional ethics and are regulated by India’s capital market regualator—SEBI.
Further, it also focuses on SEBI compliant investment research to ensure transparency, credibility and accountability in the recommendations extended to clients. It’s particularly true in a fast-moving and frequently unpredictable market such as stocks.
Enjoy the peace of mind of being able to contact a SEBI registered research analyst in Gwalior when you’re in central India – a professional who knows the local investment scene and the national investment rhythm.
Conclusion
Learn them both They are both powerful forms of analysis. The secret is to know your own aims, trading style and appetite for risk. If you’re in it for the long term and interested in building a position in solid companies, fundamental analysis is your best friend. But if you love the adrenaline of short-term trading and like to read charts, technical analysis is your pal.
And sure, it’s OK to mix and match both types of approach. And to maximize, many professional investors themselves do just that.
About Eternal Research
At Eternal Research, we believe in empowering investors with the best knowledge, data driven insights and moral compass. Being a SEBI registered research analyst, our expert team provides the most accurate calls and recommendations available to customers in those segments.
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