Explain the difference between technical and fundamental analysis using specific examples.

Expert Solution

Technical Analysis

In technical analysis we do not need to know the current news, profit and loss, balance sheet figures as everything is discounted by price.
Current Price reflect market information so not necessary to look outside of the market to form an opinion on future price movements.
The rules of technical analysis is made by keeping the greed and fear of retail investors in mind.
Its not necessary to know what the price of the share should be worth, it is only necessary to know where will it trade.
We can use weekly/ 15mins/ 60mins charts and many more time frames.
Technical can be applied on stocks,currency or commodity.

Fundamental Analysis

Fundamental Analysis is a method of evaluating a stock in an attempt to measure its intrinsic value by examining related economic, financial and other qualitative and quantitative factors.
Fundamental analysis say it is necessary to know what the price of the share should be worth.
It takes into account the quantitative and quantitative aspect of stock.
Qualitative aspect focus on studying the business model , industry needs,managment of company etc
Quantitative aspect focus on studying financial statements (P&l a/c , Balance sheet , cash flow statement) ,important ratios etc
Some of the richest investors are because of fundamental analysis like Warren Buffett, Peter Lynch etc
Fundamental cannot be applied on commodity or currency.

jeff jeffy answered 1 year ago

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