Technical Analysis VS Fundamental
Some people see people who invest in the stock market like gambling, but experienced investors who do their homework usually benefit by doing market analysis. However, even experienced investors debate the type of analysis – fundamental or technical – provides a higher rate of return. Do they use and generate the same options? What does it mean when the two approaches are conflicting?
The Difference Between Fundamental and Technical Analysis
In summary, fundamental analysis aims to determine intrinsic value by looking at business strengths, financial analysis and operating environments including macroeconomic events. While technical analysis analyze the performance of the past market by looking at the graph of the movement of price, volume, moving averages and various other statistical results.
Fundamental analysis assumes efficient market theory survives in the long run and tries to capitalize on inefficiencies in the short run.
Technical analysis assumes the fundamentals are included in the price calculation or in other words already reflected in the price chart. After that, technical analysis tries to find patterns that lead to results with high odds occurring.
Technical analysis also captures the psychological aspects of the market in past pattern reviews, while fundamental analysis fails to take into account the psychological factors of investors but believes the fundamentals will prevail in the long run, so short-term psychological disturbances will correct themselves. In general, there are different types of investors interested in certain types of analysis. Technical analysts are usually more of a short-term trader type naturally, in contrast to a fundamentalist long-term view for some others.
Investment time often determines when technical or fundamental analysis makes sense and is used. Because at the level of change in direction it appears that technical and fundamental are often out of sync. The length of time investment often starts to affect. It is generally believed that short-term investors follow or use technical analysis while long-term investors are willing to hold “flickering” for days and follow the fundamentals. For example, if you believe that seeds can be genetically modified so that it will be the future of agriculture, you may invest your money in a relevant company and be willing to follow this path despite the possible short-term noise that the owner may have.