What is the difference between technical analysis and fundamental analysis, and how would an investor use...

What is the difference between technical analysis and fundamental analysis, and how would an investor use this knowledge

Expert Solution

The difference between technical analysis and fundamental analysis are as follows:

In fundamental analysis, while analyzing a particular stock the factors that an investor sees are related to the financial information which he looks in to. For example Balance sheet, Profit and loss account, Cash Flow Statement etc. These statements can be obtained easily from the company's annual report and on the basis of analysis of these financial statements, he makes a decision of whether to invest or not in the company.

Technical Analysis is the study of trend of past prices on the basis of which estimates are made regarding the future prices of a stock. It is also known as trend analysis. The most common indicators used in this analysis are MACD, RSI, Elliot Wave etc. There are two types of trends in technical analysis i.e. Uptrend and downtrend.

The investor by using the knowledge of analyzing the company's financial statements and by studying the trends of the stock can make a better decision as compared to the investor who does not have knowledge of these types of analysis.

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jeff jeffy answered 1 day ago

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