Fundamental analysis is one of the options available to investors while evaluating any security or tradeable assets in the marketplace, while technical analysis is the second option.
However, their uses are different. Technical analysis defers from fundamental analysis in the sense that the former only looks at trading activities, while the later looks at everything about the stock.
Fundamental analysis is seeking to determine what is the actual value of the stock and if the current market price represents the true value of the security (fair price).
On the other hand, technical analysis seeks to determine how the price will move in the future, whether it is likely to go up or come down.
Takeaway
Professional analysts have over the years mastered the act of identifying trading opportunities in the capital market just by analyzing price movement of securities.
Data about price movement are readily available and can be open sourced by investors. Some brokers provide these data in more organized form for free, while others provide them at a cost to their clients.
By analyzing the trend, patterns and signals emanating from the price movements and volumes of trade, various indicators have been created by researchers.
These indicators help in identifying current market trends regarding a giving security, which the investor is interested in. These indicators also further help the investor in evaluating the trend in other to determine the strength and if it can be sustained in the market.
When a trend is a signal for an upward price movement of a particular security and there is enough data that suggests that the trend is strong and sustainable in the long run, every other thing been equal, an investor is mostly like to take a position and invest in the security.
There are various charting patterns and indicators used by investors in technical analysis, but most popular ones include moving averages, trend lines, momentum indicators and channels. A good understanding of the market also gives some investors insights to draw up unique formulas and charting patterns for technical indicators.
Further Learning
Technical analysis is about one of the simplest and fasters way of understanding securities in the capital market. It is also sure way to making quick investment decisions by investors.
By simply looking for patterns and trends, (rather than going through volumes of records of financial statements), investors can identify trading opportunities and key in sooner, rather than later.
However, this requires sufficient understanding of the act of technical analysis. To do this as an investor you will need to lay your hand on relevant study materials.
Finding relevant books to read up helps you get the confidence. You can self-study to perfection. You can also enroll on a masterclass for a robust understanding of the various charting patterns, if that is your option.
We can help. For further enquiries, please contact us at learn@clariform.com or editor@clariform.com.
