The fundamental and technical analysis are widely used for share traders but use of these analysis differs from traders to traders.
First of all lets see what these analysis means.
FUNDAMENTAL ANALYSIS
The name itself indicates that this analysis is totally based on companies’ fundamentals. Fundamental analysis is used for long term analysis and long term returns.
Following are the few fundamental terms used to forecast and analyze the companies’ future growth and based on this analysis transaction of shares will be done.
- Companies expansion or planning in coming future.
- Management processes and planning
- Meeting of Board of directors
- Declaration of yearly financial statements
- Study of past performance of the company
- Study of quarterly, half yearly and annual reports
- Companies involvement in foreign investment/ collaboration, political or economic involvements, etc.
Depending on these factors and many others, fundamental analysts prepares certain share market and share trading related terms which will be used to forecast the company growth and prospects.
The terms like
- Whether the share prices are overvalued or under valued
- Working capital ratio
- Return on equity ratio
- Debt equity ratio etc
Must understand the Fundamental and Technical Analysis
Based on these terms and other fundamentals, the analysts predict the movement of share prices that is either bullish or bearish in coming future.
Basically fundamental analysis is meant for long term investments and not for day trading or short term investment. So traders planning to invest for long term in share market then they must go for fundamental analysis.
Always good fundamental companies give good results and returns for share holders in long term.
TECHNICAL ANALYSIS
As fundamental analysis made for long term investments, likewise technical analysis is made for day traders and short term traders. Technical analysis is nothing but study of charts, support and resistance levels, technical indicators and other parameters which are useful to analyze the share price movements in short term or in day trading.
