Becoming a successful trader requires understanding the difference between fundamental and technical analysis. In our day to day lives, as we spend the 24 hours round the clock, at evert part of our life, we go through the analysis of many aspects in our lives. However, too often we do that subconsciously. Even if we do, our mind is so pre-occupied with knowledge that we often pre-assume definitions which are not 100% correct. Thus, to understand about the differences between Fundamental Analysis and Technical Analysis, it is very important that we first understand the term ‘Analysis’. When we go about a study or an examination on a particular topic in a very detailed structure, observing every minute factor, then it is called the analysis of that particular topic.
Fundamental analysis is a particular method, which is used in the evaluation of a security system with the primary aim to determine its intrinsic value. This particular method is broadly termed as ‘Fundamental Analysis’. This evaluation, which is associated in the mentioned method, mainly comprises of the studies which are based on the topics on economic conditions, financial conditions and many other factors which are quantitative and qualitative in nature.
Thus, fundamental analysis is basically related to the study of the factors which are mentioned above (including macroeconomic conditions when the study is related to economic conditions) that can put serious damage and effect on the security systems that are available.
Technical Analysis is also a detailed study on the security systems, but following the pattern of technical troubleshooting. Here, certain tools are put into employment, which are used for trading purposes. Thus, these ‘trading tools’ help in the evaluation of the security systems and giving a rough idea of what their future might be. This idea is again given by the working principle of simple analysis. Certain data and statistics are evaluated by these trading tools and the results are extracted from those certain data and statistics.
This process also in a way helps to study the exact strong points and the exact weak points of a security system and helps in predicting the future price slabs of this security which may be come to use.
The Difference between Fundamental Analysis and Technical Analysis
A brief introduction to Fundamental Analysis and Technical Analysis was presented in order to make this point of difference a bit easier and clearer to understand. Obviously, if you know the basics of a particular aspect, you can easily study the differences.
Thus, the above mentioned two terms are those which are used as a “stock-picking” technology, whose presence can help us to understand the growth to come of these stocks.
Through Fundamental Analysis, the most important aspect we can understand is the intrinsic value of a particular stock. On the other hand, Technical Analysis studies the patterns of developments through the statistics and predicts a favourable future of the stock.
It is extremely important to take into consideration the fundamentals and everything about stocks. This is the primary focus on why we need to make use of Fundamental Analysis and Technical Analysis.