November 29, 2022
4 mins read
When you’re in the share market, the hard part isn’t buying or selling.It’s figuring out where your money should go. Over time, two main approaches have become the favourites: fundamental analysis and technical analysis. Both aim to help you pick good stocks, but they do it in very different ways.
Here’s the thing that a lot of people confuse them. I used to, too. You hear both terms thrown around so casually that it’s easy to think they’re just different names for the same thing. They’re not. This piece will walk you through each, side by side, so by the end, you’ll know which one might suit your style better.
Think of fundamental analysis as getting to know a company inside out, like you would before lending a friend a large sum of money. You look at the health of the business, the earnings, the debts, the future prospects before you decide.
It’s about digging into annual reports, seeing how the industry is doing, even checking the quality of the management team. Numbers like Earnings Per Share, Price-to-Earnings ratio, and dividend yield aren’t just jargon here. They’re clues.
The goal? Work out what the company is really worth with its intrinsic value. Then you compare that with the market price to see if the stock is a hidden bargain or overpriced hype.
Now, technical analysis is a different beast. Instead of asking “Is this company good?”, it asks “What might the price do next?” It’s less about the company’s story and more about the stock’s behaviour.
Here, analysts stare at past price charts, looking for patterns that have repeated before. Price and trading volume become the main characters. Concepts like support and resistance levels tell you where the price might stall or break through.
It’s the go-to for short-term moves. Want to know the right time to jump in or get out? Technical analysis can help you time it though it won’t tell you whether the company itself is worth owning long-term.
Additional Read: 5 Technical Analysis Tools For Stock Market
Basis of Comparison | Fundamental Analysis | Technical Analysis |
Meaning | Looks at a company’s finances, assets, liabilities, revenue, profitability to judge its health. | Tracks share price patterns on charts to predict possible future moves. |
Functionality | Often used for long-term investment decisions. | Mostly used for short-term and intraday trading. |
Objective | Finds whether a stock is undervalued or overpriced compared to its true worth. | Finds the right time to enter or exit trades. |
Basis of Decision-Making | Relies on financial reports, ratios, and wider economic conditions. | Relies on price trends, market behaviour, and chart indicators. |
If you’re holding shares for years, you’ll want to know if the company can survive storms and still grow. That’s where fundamentals matter — the deeper you dig, the clearer you see the true value.
Studying industry trends, economic signals, and the company’s own data helps you spot stocks that can deliver steady returns. Patience is key here; this isn’t about quick wins.
If you’re chasing short-term price moves even within hours, the fundamentals won’t help much. Technical analysis steps in, scanning charts and spotting patterns that can signal quick profit opportunities.
It’s precise, fast, and focused on timing. But it’s not built for judging a company’s long-term worth.
Additional Read:Average True Range Indicator
Both approaches work, however, they just solve different problems. One asks, “Is this a good company to own?” The other asks, “When should I buy or sell?”
Some investors swear by one method; others blend them. Personally, I think combining the two gives you a better shot. Fundamentals guide what to buy, technicals guide when. The right choice depends on your goals, patience, and appetite for risk.
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Review the company’s financial statements, industry position, and economic context. Ratios like P/E, EPS, and dividend yield can help you judge long-term value before investing.
Study past price charts, trading volumes, and indicators such as moving averages or RSI to forecast short-term market moves and time trades effectively.
Checking a company’s balance sheet, income statement, and market position to decide if its share price matches its real value.
Find solid companies using fundamentals, then apply technicals to pinpoint when to enter or exit positions for better returns.
Fundamental analysis looks at business health for long-term investing. Technical analysis focuses on price behaviour for short-term trading decisions.
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