InvestorQ : Can I make an investment decision based on technical analysis alone?
Swati Naik made post

Can I make an investment decision based on technical analysis alone?

Answer
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Ria Roy answered.
1 year ago


That is slightly hard to say. Technicals only cover one side of the story and do not look at fundamentals of the company at all. Technical analysis only focuses on market action. Therefore, it is only one approach to analyzing stocks. When considering what stocks to buy or sell, you should use the approach that you're most comfortable with. As with all your investments, you must make your own determination whether an investment in any particular security or securities is right for you based on your investment objectives, risk tolerance, and financial situation.

The whole challenge in technical analysis is that it is based on the assumption that markets are smart enough to reflect that is to be known about markets. But that may not be true in markets like India which are less than efficient at most time. The ideal approach is to look at a company’s fundamentals for deciding whether the company is undervalued or overvalued and take your investment decision accordingly. Subsequently, technical analysis can be used to fine tune your timing of entry and exit. That is what is called an eclectic approach to stock market decision making.