What’s the difference between technical and fundamental stock analysis?
Fundamental Analysis Comments (2)
And which is better?
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admin @ May 14, 2010
Technical analysis relies on statistical trends that purport to predict future performance, either on an individual stock, or on sectors or whole markets. Fundamental analysis analyzes stocks based on basic financial data such as cash flow, earnings per share, growth, etc.
Technical analysis is basing one’e decisions on graphs of prices, and perhaps volume, totally ignoring reality (i.e. events).
Fundamental analysis is looking at reality, e.g. the company, the industry sector, the market(s), the economy.
Some people tend to be more technical, some tend to be more fundamental but no one is 100% one or the other.
Which is better?
- It depends upon the time frame you are trading/investing in. A day trader tends to be more technical as fundamentals usually don’t change much in a day. Long-term investors tend to be more fundamental.
- Buffett and his mentor Philip Fisher tend to be more fundamental.
It depends upon you.
See Wikipedia articles on both.