Have you been following the stock market space for a while and wondering how some stock traders pick winning stocks, while many others struggle? Well, they aren’t astrologers that study planet positions and make right or wrong predictions if you might think so. Rather, their strategies find them either on one team or the other; winning side or losing side!
Now, what approaches or trading styles are we talking about here?
Precisely, it is fundamental analysis and technical analysis.
Of course, you will learn them in detail in our trading courses in Pune. However, for now, let’s understand them in simple language and see which one works better.
What is Fundamental Analysis?
Fundamental analysis refers to going down to the nitty-gritty in order to determine what a firm is really worth. When carrying out elementary analysis of a company, traders identify the financial health of the company.
It involves analysing the balance sheets of the company, profit and loss account and also the vital financial ratios.
However, the analysis goes beyond the specific financial position of a company. It also involves analyzing the bigger aspects like interest rates, economy, and industry trends.
Usually, long-term investors who buy and hold assets for a longer time prefer this approach.
Want to know how to use fundamental analysis to pick up your best stocks? Then your wait is over cause we have covered it for you. Read our blog on “Master Fundamental Analysis to Select Top Stocks”
What is Technical Analysis?
Technical analysis is like weather forecasting but for stock prices.
These analysts look at price charts and thereafter attempt to identify patterns. They also assess multiple indicators like the RSI (Relative Strength Index), MACD (Moving Average Convergence Divergence), moving averages, and candlesticks to forecast price movements. Basically, they believe a lot in historical price movements and trading volumes. Thus, they consider them important indicators of a price’s next movement.
Technical analysis is popular among short-term players like intraday traders (buying and selling within the same day) or swing traders (who hold positions for some time).
Now that you’ve reviewed the basics of fundamental and technical analysis, let’s look at a few key differences between both.
Fundamental Analysis vs Technical Analysis – Key Differences
This is what distinguishes technical analysis and fundamental analysis.
| Aspect | Fundamental Analysis | Technical Analysis |
| Approach | Long-term value investing – usually suited to long-term investors who buy stocks and keep them for a long time | Short-term trading/timing – preferred by short-term traders who buy and sell stocks within a day or short timeframe |
| Data Analyzed | Company financial reports, industry situation and economic updates and news | Volume, price charts and patterns |
| Decision Enabler | Company performance | Market behavior |
| Approach | Analytical and research-driven | Visual and pattern-driven |
| Key Tools | P/E ratio, debt levels, financial reports, EPS and industry analysis | Candlesticks, moving averages, etc. |
| Entry/Exit Decisions | Based on the company’s valuation and growth potential | Reliant on timing and price signals |
| Learning Curve | Understanding of finance and economics | Practice in reading charts, and applying various indicators appropriately. |
| Emotional Bias | Research-driven, hence the emotional bias is a little low | Influenced by sentiments and false signals – trading discipline and emotional control is a must! |
| Risk Management Strategies | Dependent on business fundamentals and asset allocation | Setting stop-loss, position sizing and chart-based risk management |
So, Which Strategy is Better – Fundamental Analysis or Technical Analysis?
We cannot generalize the answer, considering one better than the other or any one strategy the most suitable one. It all depends on what you want, strategy, method and so on. Let’s look at some examples.
For instance, if you are a long-term player who invests in blue-chip companies or mutual funds, you can use fundamental analysis. However, if you want to gain quick profits, while jumping in and out of positions, you can adopt technical analysis. But if you want to potentially benefit from both, you can blend both strategies. So, you analyze the company’s fundamentals first and then choose the right time to enter or exit using charts.
Why Learn Both – And That Too in a Reputed Trading Institute in Pune?
Whether you invest or trade, learning both styles with the best trading classes in Pune can help you become a more informed and confident participant. You can make more educated decisions based on analysis instead of instincts or sentiments.
Besides, learning them through formal training helps you understand both value and timing and helps you increase your consistency in trading decisions.
And the Place to Become a Confident Trader and Investor Is…!
You guessed it right, Wealth Note. For years, we’ve been one of the most preferred trading classes in Pune among aspiring stock market players in and around Pune. To date, we’ve trained thousands of people to become independent stock traders or investors. Many of them have become highly successful and continue to serve as an inspiration for many.
Wondering how? All thanks to our experienced trainers, continuously updated curriculum (that covers technical, strategic, and emotional aspects of the stock market), extensive practice, and an approach that relies on real-life experiences. Besides, our learners have access to real-time guidance during the training so that they learn, practice, and make decisions at the same time. Want to know more? Call us at +91 7068001919.
