Fundamental Analysis Vs Technical Analysis
Which One to Choose That Will Make the Most Money for You

Fundamental Analysis or Technical Analysis
Nothing Is Perfect, So Does Investing Approach

Summarized Overview

You'll also find information on how to make use of both approaches to consistently make money in stock market.

Fundamental and Technical Analysis Basic Foundation

You are not the only investor who confused to which analysis to stick with. And being confused to use either fundamental analysis or technical analysis, most novice stock investors decided to shy away from stock market investing. Often than not, they prefer to delay their own investment decision until they clear how to go about it. In investment world, you are losing money every single minute you procrastinate your investing decision!

By now you should know what are fundamental analysis and technical analysis.

To recall, fundamental analysis is about investing in the companies behind each stocks. Meaning, you are not just buy any stocks, but only stocks with strong business foundations with sustainable profits. You don’t care what its daily prices are because you want to hold them as long as possible. You want to be its shareholder and get portion of its profits as the company grows.

As for technical analysis, you don’t care if the stock has profitable business foundation. But as long as its stock price offers ‘profitable volatility’, you will trade them accordingly. Though you are not interested in holding the stocks forever, you trading timeframe can be as short as one hour or as long as five years.

The Differences Between the Two Analyses

Fundamental Principle

Fundamental analyst depends on the power of compounding interest. The assumption is that the company will reinvest its profits to generate more cash. Mind you, it is not impossible for the company to double its profits every year! (especially for small cap stock investing). As the company grows exponentially, its share price will increase correspondingly over time.

On the other hand, technical analyst invests in the market volatility. Although the stock price will increase over the time, short term price volatility can still provide profitable trading opportunity. Since stock valuation is not that important, stock traders can trade as many stocks and as frequently as possible. Thus, if you get the right trading system all the time, you will ideally be making unlimited return.

Analyst Lifestyles

Fundamental analysts can have good dreams because they usually sleep well. If you are one of them, you don’t have to be afraid of daily stock price fluctuations. Why care so much for $1 to $2 per day price movements and uncertainties when you can get $100,000 30 years later almost certainly and do nothing? The ‘do nothing’ is what makes you an investor. Don’t you think so? Once you bought the shares, you will only sell them if there are fundamental changes; such as change in management or business model. Otherwise, continue riding on their profits and keep on collecting dividends or bonus issues by ‘doing nothing’.

Doesn’t it sound so peaceful?

Unfortunately, that is not the case for technical analysis devotees.

Technical analyst has to monitor stock prices very closely and anticipate economic outlook continuously. Due to this nature, technical analysis is more like an additional job for you than an investment. When I say ‘job’ it means that you won’t be getting any money if you don’t trade. If you don’t monitor, you don’t know when to sell the stocks. And normally, you don’t get the money if you can’t sell the stock. Moreover, if you overlook any economic data, you might be losing more money than you could ever make. That is why technical analyst or stock trader is a professional jobs and need sufficient fund and trading tools too.

Which Analysis to Choose

Besides, fundamental analysis requires your least effort. One or two hours per day are sufficient to screen your potential stocks. Over the weekend, you can fine tune your investment by further investigating the company. Therefore, you can still make money from stock market on your own even if you have day job to take care of.

Compared to fundamental analysis, technical analysis needs extra efforts, time and budgets too. Stock trading software is an important tool you should have if you are serious about trading stocks. And enough funds can helps you manage your portfolio effectively by applying variety of trading strategies and from good asset allocation. Since trading stocks is indeed a professional job, you can trade for your own living if you confident enough to make it full time.

Now, ask yourself. Which analysis fit your situations?

What? Still not sure which analysis to choose?

Stock investing tips for you today…..

Instead of choosing which one, why don’t you use both analyses? Yes! Both!

First, select good stocks with good business performance using fundamental analysis. You can use my good stock pick practice to do this.

While waiting the stock to be undervalued, you can trade the stock!

By doing this, you can monetize the short term price fluctuations.

In the same time, it will also limit your potential losses by having only quality stocks (as quality stocks seldom went broke in short term). And if the prices fall below its intrinsic value, buy more! This is for long term.

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Additional Reading

How to Calculate Intrinsic Value for Stock Investing
To calculate intrinsic value is vital. It is Warren Buffett's secret that you can't afford to lose. Discover step by step on how to calculate intrinsic value right here.

Guide in Analyzing Company for Stock Investing
Four guidelines in analyzing company that you are about to invest in. Find how companies difference to each other. And ultimately, how can you make money by investing in the right stocks.

Introduction to Stock Trading Guide – Why Most Beginners Lose Money
Stock trading is not investment. Most people who trading stock lose money because they confuse stock trading with stock investing.

Related Books

Technical Analysis Explained : The Successful Investor's Guide to Spotting Investment Trends and Turning PointsLet Martin Pring's landmark Technical Analysis Explained provide you with a step-by-step program for incorporating technical analysis into your overall trading strategy and increasing your predictive accuracy and potential profit with every trade you make.

How Technical Analysis Works (New York Institute of Finance)
The book explains how and why technical patterns and indicators work in an entertaining way. On top of that, the examples of patterns in the book are not "text book".

Technical Analysis of Stock Trends
This book revolutionized technical investment approaches and showed traders and investors how to make money regardless of what the market is doing.

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