Technical vs Fundamental Analysis of Stocks

What is the difference between technical and fundamental analysis? Technical analysis focuses on the analysis of data generated from the market activity and uses this data to predict the future price movements of stock. Fundamental analysis, on the other hand, looks at the intrinsic value of a particular stock.

Fundamental Analysis versus Technical Analysis:

1) Fundamental analysts make investment decision by examining the company, the industry and the economy to estimate the intrinsic value of a security. Technical analysts do not attempt to measure a stock's intrinsic value, but instead they use stock market charts and other tools to estimate future price trends.

2) Fundamental analysis takes a long-term approach to analyzing the stock market, while technical analysis can be used on a time frame of short to medium term. Stock traders often use technical statistical analysis to predict the short and mid term price fluctuations to trade the market profitably.

3) Fundamental analysis focuses on financial ratios such as the earnings per share, price to earnings ratio, return on equity, PEG ratio, and so on; whereas technical analysis focuses on historical price movements to determine possible future price movements.

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