| It has always been a classic debate between the | | | | predict the short and mid term price fluctuations to |
| two camps of stock trader: The fundamentalist and | | | | trade the market profitably. |
| the Technical Chart Analysis Group. Which school of | | | | So, the golden question remains: Which school of |
| trading is more effective? | | | | discipline is more effective? Well, my personal view is |
| Firstly, we have to define both terms. | | | | as follow: |
| Fundamental analysis is the process of looking at a | | | | (a) Technical analysis could be use in the short to |
| business at the basic or fundamental financial level. | | | | medium time frame for trading as the stock price |
| This type of analysis involves heavily the analysis of | | | | movement is affected by largely by external events |
| key ratios of a business to determine its financial | | | | that cause swings in trading moods and sentiments |
| health and growth potential to give you an idea of | | | | which will dictate prices of stock. Fundamental |
| the value its stock. | | | | analysis could not effectively function in the short |
| Fundamental analysis could be used alone or in | | | | and medium term analysis of stock price as it is |
| combination with other tools to evaluate stock for | | | | affected by external events that is not relevant to |
| investment purposes. The goal is to determine the | | | | the company's business growth and potential. |
| current worth and, more importantly, how the | | | | (b) However, in the long run, a good company with |
| market values the stock. | | | | sound management and business growth will be able |
| Technical charting analysis is a way of gathering and | | | | to attract fund manager's attention to invest in the |
| processing price and volume information of a | | | | company. This in turn will be reflected in the price |
| particular security by applying mathematical equations | | | | changes and the price trends Technical analysis in the |
| and then plotting the resulting data onto graphs in | | | | longer time frame will also be able to conclude the |
| order to predict future price movements. Unlike the | | | | rise of the price of a stock of a good company. |
| fundamental analysis, technical analysis is only | | | | Hence, in the long timeframe of investment, technical |
| concerned with the current price and trading volume | | | | and fundamental analysis will likely have the same |
| of a stock to predict future price movement. | | | | conclusion. |
| Traders use technical statistical analysis of a stock to | | | | |