Fundamental and Technical Trading - Comparison
Fundamental analysis and technical analysis are the most common trading strategies adopted by position traders and investors. Both types of strategies often offer reasonable profits and limit risks, when interpreted and practiced correctly. Here is a comparison between trading/investing based on fundamental analysis and on technical indictors.
Fundamental analysis includes the detailed study of the company, its promoters, its management, its past performance, its industry, financial stability, etc. These types of strategies favor long-term investors, investors who have no time to monitor the price changes of stocks, and investors who lack access to advanced trading tools. Fundamental investors face less downside risk.
Technical analysis includes interpreting historical and current stock price and market performances, and predicting short-term and long-term price trends. These types of strategies favor comparatively short-term investors and traders. Technical investing often requires active monitoring and access to advanced trading tools. The downside risk can be high compared to fundamental investing.
Many investors follow a mixed strategy. They short-list a number of companies having good fundamentals and then use technical analysis to find out the most suitable stock for investing over a fixed term. In this way they can increase the short-term profit and can limit the downside risk.
Fundamental analysis includes the detailed study of the company, its promoters, its management, its past performance, its industry, financial stability, etc. These types of strategies favor long-term investors, investors who have no time to monitor the price changes of stocks, and investors who lack access to advanced trading tools. Fundamental investors face less downside risk.
Technical analysis includes interpreting historical and current stock price and market performances, and predicting short-term and long-term price trends. These types of strategies favor comparatively short-term investors and traders. Technical investing often requires active monitoring and access to advanced trading tools. The downside risk can be high compared to fundamental investing.
Many investors follow a mixed strategy. They short-list a number of companies having good fundamentals and then use technical analysis to find out the most suitable stock for investing over a fixed term. In this way they can increase the short-term profit and can limit the downside risk.
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posted by Daniel Pipitone at
4:13 AM
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