Fundamental Analysis vs Technical Analysis

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Everybody looks upto the stock market for a primary or secondary source of income. To invest profitably in the stock market, you need to perform some analysis before. In general there are broadly two ways to analyse a stock:

  1. Technical Analysis

  2. Fundamental Analysis

Technical analysis is performed to capitalise on the short term gains in intra-day trading. In technical analysis, you analyse various charts, candlestick patterns (see below), study statistics, on the basis of which you predict the stock price movements.

Candlestick Chart Source: Trade Station

Fundamental analysis is performed to capitalise on the long term gains of a stock. In fundamental analysis, you study the financials of the company, understand the management’s long term goals, study whether they align with the upcoming policy changes, evaluate the intrinsic value of a stock and on the basis of all this you calculate if the company is profitable for you in the long term or not.

People who want to invest passively in the stock market over a long period of time, should perform the fundamental analysis of a stock and people who prefer to keep a minute to minute record of the stock market fluctuations should perform the technical analysis of a stock to earn through intra-day trading.

In the next series of articles, I will cover the Fundamental Analysis of a stock step-by-step. Stay tuned to InvestXP!

Author | Akanksha Goel