Online Fundamental and Technical Analysis Lessons
Fundamental
ANALYSIS
Fundamental analysis is
the study of various factors which affect the supply and
demand situation of a market. The fundamental analyst
makes an assessment of important variables that might
influence the market to derive the proper price of a
good now or in the future. The work is inherently
predictive because the analyst makes projections
regarding the future supply and demand equation of the
market. Fundamental analysis generally deals with
broader movements of a longer term nature and is not as
concerned with precise market timing. The fundamentalist
often looks at the cause and effect of one variable and
its impact on the market.
One argument against
fundamental analysis is that it is impossible to predict
the future, and there is no way to analyze all the
myriad factors which influence the market. The argument
is true but does not diminish the significance of
fundamental analysis. Less time should be spent deriding
both technical and fundamental analysis but instead more
time should be used to ascertain how they can be of
benefit to the trader. Learning the important
fundamentals of a market can provide the trader with a
deeper understanding of the supply and demand equation
of the market. Learning the technical aspects of a
market may help a person better time a trade. Knowing
fundamental information in conjunction with technical
analysis may prove valuable in helping the individual
analyze and trade the market more effectively.
STARTING
POINT OF
TECHNICAL ANALYSIS
The
starting point of most technical studies is a price
chart of the market. The majority of price charts,
called bar charts, plot price versus time, and some
include volume and open interest on the horizontal
axis. Japanese candlestick charts are similar in
nature to bar charts, but look slightly different.
Some charts, such as point and figure charts, plot
price versus movement and are more concerned with
how the market moves through various price levels.
Some of the various types of charts include Bar charts, Japanese candlestick
charts, Point and figure
charts Market profile and Swing charts
DISTINCTIONS BETWEEN TECHNICAL AND FUNDAMENTAL ANALYSIS
There
are constant battles waged by fundamentalists against
technicians, and vice versa. It is not the author's
intention to state one is better than the other, but
rather, to suggest that both methods merit serious
study. Technical analysis is often reactive in nature,
whereas fundamental analysis is usually predictive in
nature. Technical analysis is generally concerned with
watching market behavior and then reacting when a move
might happen. Fundamental analysis is concerned with why
things happen and predicting the outcome of an event. In
essence, technical analysis is concerned with the
question of when, and fundamental analysis with the
question of why.
Online Fundamental and
Technical Analysis Lessons
