Types of Stock Market Analysis

Okay, so by now, you have an idea about what happens in the stock market; you can name all the stock market participants, different stock types, and reasons why stock prices fluctuate. This is all obviously mega important, but trading is about trying to predict the future. So, how are you supposed to predict the future prices of stocks???

Luckily, stock markets were founded four centuries ago, so a bunch of brilliant people have developed sophisticated and simple techniques to predict stocks’ future price movement. Does it work? Well, yes. If you know how to use these methods correctly, then you can make profits as a trader. Let’s see what we are talking about.

What is Stock Market Analysis?

Stock markets are highly unpredictable, and unless you take your time to analyze the markets and study your investments, there is a high chance it will turn into a gambling game. And you don’t want that to happen. You want to make a smart and informed decision.

At the end of the day, good research and knowledge will take you so much further than gambling ever could. Okay, time to get to the real stuff. There are various methods through which one can analyze the movement of the stock market, or in other words, perform a stock market analysis. These fall into two broad categories: technical analysis and fundamental analysis.

Fundamental analysis is the study of an organization’s stock prices in relation to the factors affecting the company, such as its financials, revenue, profits, expenses, etc. Further, fundamental analysts take a closer look at news, market updates, economic data, rumors, and other factors that impact the growth of the economy and a specific company. 

Technical analysis, on the other hand, is heavily based on data, chart patterns, and trends. Unlike fundamental analysts, technical analysts use indicators to predict the future price movement of a stock without analyzing the economic strength or weakness of the stock market or a particular asset. 

Technical Analysis And Fundamental Analysis

So which type of analysis is the best for you? The million-dollar question…

Everyone would love to know the answer to that, believe me. There has been a constant debate about which analysis is better, but to tell you the truth, neither of these techniques has been proven to have an overall advantage over the other.

In fact, many traders choose to combine these methods in an effort to conquer the stock market and to be able to make profits. At the end of the day, not one method works for all traders, and the key to success is finding the best method for YOU. If you rely solely on technical analysis without considering fundamental news, you expose yourself to high risk. At the same time, if you do not use technical analysis, you may miss many trading opportunities in the market.

So, let’s start by having a closer look at both technical and fundamental analysis and how you would analyze and develop ideas to trade stocks using each of these. Ready when you are!