Technical Analysis Vs. Fundamental Analysis
Successful Share Trading depends
on the conceptual ability of trader to predict accurately prices and practical ingenuity to manage efficiently
risks. Two techniques are commonly used to forecast prices - Fundamental
Analysis & Technical Analysis. Technical Analysis forecasts the direction
of prices through the study of past market data of price and volume. On the
other hand, Fundamental Analysis determines the intrinsic or true value of the
shares. If the intrinsic value is higher than the market price it is
recommended to buy the share, if it is equal to the market price hold the share
and if it is less than the market price sell the shares. The fundamental
analysis consists of four types of analyses, that is, Economic Analysis,
Industry Analysis, Company Analysis, & CEO/Top Management Analysis.
Investors can use these different
but to some extent complementary methods for stock trading. For example, a
fundamental investor may use technical arguments for deciding entry and exit
points, while, a technical investor can use fundamentals to limit their
universe of possible stock to 'Well Performing' companies.
Muhammad Ilyas
CEO
Silverline
Management Consultants & Software Engineers (SMCSE)
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