Difference in Fundamental Analysis and Technical Analysis of Stock

In the stock market, there are two different methods used to assess investments: technical analysis and fundamental analysis. These are the key distinctions between the two approaches.

1. Meaning
   The traditional theory of fundamental analysis is the valuation of stock based on company’s financials and economic factors and the technical analysis focuses on predicting future price action based on historical patterns.
2. Assumption
   Technical analysis is based on the assumption that all the required data is reflected in the share price and any changing in share price merely reflects the movement of the company while fundamental analysis is based on the idea that it is possible to analyze a company’s fundamentals to estimate its potential growth.
3. Objective
   Fundamental analysis seeks to ascertain the intrinsic value of a business or stock whereas technical analysis seeks to forecast future price patterns of assets.
4. Data
   Fundamental analysis is based on company and broader economic data while technical analysis is based on the past data especially on price data.
5. Time Horizon
   The use of fundamental analysis is more relevant to long-term investment strategies and the use of technical analysis techniques is well suited for short-term trading.
6. Interpretation
   Fundamental analysis tells investors to buy stocks at low prices with growth potential or to sell stocks at high prices, while technical analysis uses graphs to determine which way prices will move and when to enter and exit trades.
7. Indicators
   Fundamental analysis analyze stock technical with financial statistics such as earnings and ratios while technical analysis uses assistive tools such as MAs, RSI (Relative Strength Index), and MACDs (Moving Average Convergence Divergence) to determine price levels.

In conclusion, for long-term investments, fundamental analysis explores the inherent worth of a security based on economic and financial health considerations. Technical analysis, on the other hand, is concentrated on short-term trading and forecasts future price trends by examining past price movements and patterns. While they address different investing strategies and time spans, both approaches provide investors with insightful information.

Fundamental analysis, on the other hand, focuses on the securities found attractive as long-term investments that rely on the analysis of a secondary metric and factors that provide value to the economic and financial health of a security. Technical analysis focuses more on the theory of short-term trading and predicted future price movements according to past price patterns. Though these analysis approaches write on different topics concerning investing and timeframes, both proven effective strategies providing investors with significant information.

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