The ABC’s of Trading Analysis FROM Technical to Fundamental


The ongoing battle between Technical and Fundamental Analysis is most likely as old as trading itself. This vs. That, what do we opt for to make the most of our trading? Is there one right answer? Let’s take a look!

Technical Analysis – what it’s all about

This method analyzes charts, past stock pricing, indices and other historical data in search of patterns to predict future trends. Technical Analysis can be used for short , medium and long-term investments. Those who use technicals believe the intrinsic value has already been priced in.

Technical Analysis supposedly comprises a set of ‘Golden rules’. How many? Opinions differ. But here’s a few, to familiarize yourself with:

  • We trust in stock prices to reflect all that might affect a company.
  • We remain technical in sticking to the trading plan, with little regard to the situation.
  • We recognize movements in price as patterns, and don’t try to go against them. Markets don’t usually behave randomly.
  • Price patterns can be repetitive due to market/investor psychology. Reactions can be consistent, you just have to give a pattern time to reinstate itself.

And what about Fundamental?

Fundamental analysis requires taking all factors into account when making trading choices. This includes financial statements, a company’s market standing, as well as the political and economic climate. The diverse nature and the wide selection of variables to this approach can make it a more suitable long-term path to trading. This yields a few central focus points:

  • Realm of research – Before trading, we evaluate the stock/company thoroughly with the help of indicators, history, political news, and all else there is to it.
  • We believe that in the long-term, stock prices can correct themselves to intrinsic value.
  • We tend to buy undervalued stocks and hold onto them in the wait for the correction.

Is there a way to have the best of both worlds?

Absolutely! And the combination of the two, generally tends to lead to top trading choices. Watching your technicals, while staying up-to-date with fundamentals is easier than it seems. And if you are a technical trader, who is unsure where to begin with fundamental analysis, make use of online resources and your broker’s trading academy.

After all, who said you can’t have it all?

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