Technical Analysis Vs Fundamental Analysis

What is Technical Analysis?

In terms of financial perspective, it’s a methodology for forecasting primarily the values and volume of stocks or securities based upon the past market data.

Unlike fundamental analysis, which analyzes the securities values base on sales and earnings, this mainly studies the price and volumes of securities. It uses tools which aids inspect the ways supply and demand for security will affect the price and volume. Since most of the trader in forex focus on short term price movement, technical analysis is very helpful in terms of forecasting the securities price movement hence it is widely used among the traders.

Across the industry, scholars and researchers have developed many system and indicators to support technical analysis such as price trend, chart pattern, volume and momentum indicators, oscillators, and support and resistance level, where each indicator has its own primary functions focus to indicate. Like chart, the pattern helps indicating trade lines, and channels, while price trend determines the current market trend including support and resistance level.

What is Fundamental Analysis?

It’s a methodology to measure securities values based on related economics and financial factors which analyze anything that affects the security value from micro to micro perspectives like the state of the economy, industry conditions, and effectiveness of company’s management. 

Unlike technical analysis, the main functions of fundamental analysis to determining a stock’s real or fair market value which suggest if the stock is currently trading at a price that is higher or lower than its real value.

In order to analyze such data, analysts study overall sate of the economy like revenues, earnings, future growth, profit margin and return, which helps evaluate a company’s stock value