Technical analysis and fundamental analysis are two different approaches to evaluating securities. Technical analysis is a method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Fundamental analysis, on the other hand, involves analyzing the intrinsic value of a security by examining related economic and financial factors, including a company’s financial statements and industry conditions.
Here is a comparison of technical analysis and fundamental analysis:
| Technical Analysis | Fundamental Analysis |
|---|---|
| Focuses on past market data, such as prices and volume | Focuses on the intrinsic value of a security |
| Uses charts and other technical indicators to predict future price movements | Considers a company’s financial statements and other fundamental factors |
| Emphasizes short-term price movements | Emphasizes long-term investment potential |
| Can be used on any security with historical trading data | Typically used on stocks, but can also be applied to other securities |
Both technical analysis and fundamental analysis can be used to make investment decisions, but they are often used in different ways. Technical analysis is often used by traders to make short-term buy and sell decisions, while fundamental analysis is more commonly used by long-term investors to determine the intrinsic value of a security. Some investors and traders may use both approaches in combination to make investment decisions.
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