Technical and Fundamental Analysis

11 במרץ 2021

A Technical Analysis topic is presented simply and concisely for beginners. ___

Prompt: New traders should take some time and carefully read the post entitled 'You can't beat the market' that is located in my profile.

Disclaimer
The author of this text is not an investment advisor. The preceding content is intended to be used for informational and educational purposes only.
It is not an advice or inducement for the purchase or sale of the products mentioned. Before making any investment based on your own personal circumstances,
it is very important to do your own research and analysis and also take independent financial advice from a professional to verify any information provided here.

14 במרץ 2021

הערה

A Technical Analysis topic presented simply and concisely for beginners

TECHNICAL AND FUNDAMENTAL ANALYSIS

There are two methods of a market analysis in order to predict the
future trend of its price. These are the Technical and the Fundamental
Analysis methods. The common goal of both methods is to help the
investor to determine probable future trends in prices so as to choose
the right market and the right time to invest in it.

Technical Analysis is the method of analysis that illustrates and studies
a market's action in the past using charts, technical indicators and
standard repeating patterns, for the purpose of forecasting price trends
in the future.

Technical Analysis can practically be applied to every market that is in
stocks, commodities, bonds, futures etc.

The term 'action' mainly refers to price and volume but can include more
sources of information if available (number of transactions, pieces per
transaction, buy/sell volume, open interest for futures etc.).

It is very important to emphasize here that the Technical Analysis can
forecast only the price trend of a market and not its exact move.

Fundamental Analysis is the method which, in order to predict the future
course of a stock, carries out a statistical and econometric analysis to
project the future of the macroeconomic aggregates affecting it (for
example inflation, interest rates, unemployment, etc.). It also analyses
and calculates all accounting figures and economic indicators of a stock
in order to estimate its intrinsic value.

The Fundamental Analysis examines the cause that makes the market
move whilst the Technical Analysis examines the effect of the cause.

Although the Technical and the Fundamental Analysis methods are not
rival but complementary, many Technical Analysts are of the opinion that
they do not need the Fundamental Analysis because it is enough for them
to study the effect and they do not care about the reasons that cause it,
whilst others, like me, feel safer to use Fundamental Analysis' results to
include in their stock watch lists only stocks with excellent fundamentals.

Here must be stressed that in the beginning of major trend reversals
of the market the two methods disagree. This happens because whilst
the Technical Analysis catches the trend reversals while they happen, the
known to the general public results of Fundamental Analysis do not
support these trend reversals.

Generally the market's price has already discounted all the known
fundamentals and now discounts the unknown ones.

From the above analysis emerges the conclusion that the great advantage
of the Technical Analysis is that it incorporates all the internal information
of "smart money" and the unknown fundamentals of the market.

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