{"id":29195,"date":"2012-04-20T11:32:43","date_gmt":"2012-04-20T15:32:43","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/2012\/04\/technical-analysis-vs-fundamental-analysis\/"},"modified":"2012-04-20T11:32:43","modified_gmt":"2012-04-20T15:32:43","slug":"technical-analysis-vs-fundamental-analysis","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/04\/20\/technical-analysis-vs-fundamental-analysis\/","title":{"rendered":"Technical Analysis vs. Fundamental Analysis"},"content":{"rendered":"

Article by Investment U<\/a> <\/p>\n

\"Technical<\/p>\n

Fundamental analysis focuses on the company's fundamentals. Technical analysis is primarily concerned with the price movements in the market.<\/p>\n<\/div>\n

When you\u2019re making the attempt to analyze securities and make investment decisions, the strategies you use will most likely find themselves in two very broad categories: fundamental analysis or technical analysis.<\/p>\n

Here at Investment U<\/em> we stress fundamental analysis as the most important strategy. Take a look at the company\u2019s DNA \u2013 financial statements, their industry, management and other characteristics of a company \u2013 so you can try to estimate its intrinsic value. It\u2019s the fundamental focus on the company itself.<\/p>\n

Technical analysis takes a completely different approach, but sometimes an important one nonetheless; it doesn’t care one bit about the “value” of a company or a commodity. Technicians or chartists<\/a> (a term we will explore more) are primarily concerned with the price movements in the market.<\/p>\n

What a \u201cchartist\u201d is really looking at is the supply and demand in a market in an attempt to determine what direction, or trend<\/a>, that company or commodity will continue going forward. In other words, technical analysis attempts to understand the emotions in the market by studying the market itself, as opposed to its components.<\/p>\n

If you\u2019re aware of the pros and cons of technical analysis and the types of charts they use, you will then have a new tool at your disposal no matter what your end game is in investing in the market. So let\u2019s see what these charts are and how they\u2019re used by first looking at the simplest.<\/p>\n

Line Chart<\/strong><\/h2>\n

What you\u2019re probably most familiar with are the typical graphs you see on CNBC, Fox Business, Bloomberg<\/em> and most other financial programs or business newspaper sections: the line chart.<\/p>\n

The line chart is one of the important kinds of technical analysis charts but only represents the closing prices over a set period of time. It doesn\u2019t provide visual information of the trading range for the individual points such as the high, low and opening prices. This type of chart is particularly useful for providing an illustration of the trend of a stock’s price or a market’s movement. <\/strong><\/p>\n

For many this is enough information. They just want to see the closing price trend over a certain period of time, and maybe make a decision to buy or sell aware of that information. However, chartists have taken the simple graph to new measures as to what and how much market information a chart can actually provide.<\/p>\n

How Much Info Can You Put in One Graph?<\/strong><\/h2>\n

Over the next week, I\u2019ll be showing you some more advanced charts that many traders use as predictive tools. You may have seen them or have been referred to them but didn\u2019t have enough understanding as to what they\u2019re actually attempting to accomplish. There are a number of traders out there privy to this information and understanding and you should be, too.<\/p>\n

I\u2019ll be taking a look at:<\/p>\n