Technical Analysis v/s Fundamental Analysis

Technical Analysis

The traders carry out fundamental analysis of any company as this is the technique that determines the value of the stock by focusing on factors that affect the actual business of the company and its future prospects. While in technical analysis, the experts analyze the trend of the market with the help of technical indicators.

To buy and sell these stocks traders apply different strategies and indicators to close the deal in benefit. There are different types of indicators used in the technical analysis. Traders use different ways to trade. Traders and technical analysts not only apply single strategy to study but also combine two strategies in order get the best study results. Buy and sell signal initiator uses Bollinger band and RSI act as a confirmation. Bollinger Bands is a technical analysis tool invented by John Bollinger in the 1980s. Bollinger Bands are one of the most common volatility indicators used by analysts in the technical stock market analysis.

Three separate lines on a price chart are plotted by the band; with the outer two representing a two-standard-deviation range from a centerline calculated using a moving average. Since the standard deviations widen or narrow dynamically based on the security’s trading range, Bollinger Bands are a bendable and adaptable tool. Bollinger Bands is frequently combined with the Relative Strength Index so that the trend’s relative strength is confirmed. The RSI compares the number of days a security closes up versus closing down over a period.

It is a momentum indicator. On a series from zero to 100, these values are plotted, with over-bought securities typically expected when the RSI returns a value over 70 and oversold securities expected when the value is fewer than 30. The RSI acts to support or dismiss possible price trends when the two strategies are combined.

Apart from these two technical indicators, there are many other technical indicators that are frequently used by the analysts.

Fundamental analysis counts in the real, public data in the evaluation of the value of the stock. The most analysts make use of fundamental analysis to value stocks. The experienced traders perform fundamental analysis on the value of the bond by simply gauging at the economic factors like interest rates and the overall state of the economy. For stocks, this method uses factors like, revenues, future growth, earnings, profit margins, return on equity and various other data to determine the underlying value of a company and potential for future growth. Thus, fundamental analysis focuses on the financial statements of the company being evaluated.

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