Technical Analysis V/S Fundamental Analysis

Technical Analysis and Fundamental Analysis are two major school of thoughts used to predict the market movements but have their own way of operation. Traders use technical analysis and investors use fundamental analysis to find out and explore the stock market future prices. Each method has its own unique qualities that are used by specific players in the stock market. Hence, it is important to understand the distinction between the two and use it as per one’s advantage.

Fundamental analysis understands the stock of a company through the measurement of its intrinsic value. Fundamental analysts study everything and look at every aspect of the economy from overall working to industry conditions to the financial power and management of each company in the economy. Though, a stock value is a matter of opinion, relatively undervalued companies can outperform over the long term.

The major basis of technical analysis is studying stock prices or volume data. The aim here is to understand and explore the likely market scenarios. Technical analysts use chart patterns, technical indicators, trends, support and resistance levels, and price and volume to search trading opportunities.

The core difference between the two is that under technical analysis, traders look to find out the trading opportunities on the basis of statistical trends, like movements in stock price and volume. Technical analysts do not measure the intrinsic value of a stock, rather they use charts to identify patterns and trends that suggest the future scope of a stock. Price action is used as an identification of the market participant behavior in the past and future. Candlestick charts, support and resistant levels, technical indicators are important elements of technical analysis.  

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