When getting into the world of stocks, it is vital for you to learn the basics. As a beginner, learning the ‘how to’ and ‘what is’ will definitely be beneficial as you go along the way. With this said, there are two main strategies when it comes to stocks- Fundamental Analysis and Technical Analysis.
Fundamental analysis is a technique wherein you go into determining the value of what you want to invest in. In the process, you will somehow dwell on certain factors that determine what the company’s business truly is, as well as its prospects. You may look into the economy as a whole and the industry, so that an analysis on its overall well being can be done. Here, you don’t just look at a financial entity’s prices and movement, but also at how everything actually works. You will be able to see whether or not a certain company is actually growing in terms of revenue, making profit, and if they will beat competition even in the future.
As mentioned, when trying to figure out if a company’s stock is worth your investment, you will run into factors that can be categorized as quantitative and qualitative. The first basically means being able to measure something in numbers or numerical terms, while the latter deals with the character or quality aspect.
- Learn who is the best known fundamental analyst Warren Buffett
- Morningstar.com – One of the greatest data resources on the net. Stores historical data on companies valuation, stocks grades, and much much more.
- Yahoo Finance!
- Google Finance Stock screener.
Technical Analysis is the process of analyzing the market or the stock movement and activity. Here, you try to find out about the company’s past prices as well as value through tools, such as charts and the like. You will be able to see patterns which in turn, helps you identify the possible future events or activities. As a technical analyst, it does not matter if a company is undervalued because all you really care about is the security’s past trading trends. This will eventually help you foresee where the security is heading and the activities that may arise.
With technical analysis, traders often don’t feel the need to study the fundamentals of a security since they believe the graph holds all the information. Here, you don’t dive into the fundamental factors separately because you are looking at its data as a whole, with the use of charts.
- StockCharts.com – Learn in ChartSchool, which has a great introduction to this subject, free charting service and a collection of pre-scanned patterns.
- Technical Analysis: Introduction – Investopedia.com
There are those who don’t agree that the two mentioned techniques should be combined, but as they say ‘two heads are always better than one.’ So try to look at both aspects and understand their importance, so that you will be able to start off on the right foot. Having this knowledge will always bring forth positive results, whether you choose to invest based on fundamental or technical analysis.
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