InvestorQ : How do I understand the basic difference fundamentals and technicals?
Katherine Gonsalves made post

How do I understand the basic difference fundamentals and technicals?

Answer
user profile image
Mitali Bhutta answered.
2 years ago


Fundamental analysis is a mix of financial analysis and qualitative analysis. Financial analysis is used to make inferences about future share prices and overall health of a company using company reports and non-financial information such as industry comparisons and estimates of demand for growth of the company’s products. It is important to ask questions such as “What advantage does this firm have over other firms?” or “Does it have a sizeable market share?” Fundamentals look at the product, disruptive abilities, market potential, growth, margins, ROE valuations etc. It also focuses on qualitative factors like management pedigree, corporate governance, brand loyalty etc.
The other side of the study is technical analysis. Technical analysis involves the use of a two-dimensional chart to map the historical movement of prices. Technicals believe that there is no use looking at fundamentals as everything that is to be known is there in the price. It uses historical values of share prices and volume charts to make predictions about future prices. Technicals believe that if you can identify the patterns and extrapolate them you can make money in the stock markets.
Ideally, you must mix up both to a good degree. Fundamentals allow you to take a valuation gauge of the stock while technicals allow you to time your entry and exit from the stock better.