Fundamental Analysis
Fundamental analysis disregards technical analysis as being speculative and irrational. Fundamental analysis believes in determining the fundamentals of a company. This may be determined by the company's financial performance, statements, evaluation ratios (Please refer article on Basic Ratio's), order book, bottom lines, top line profitability and so on. A fundamental analyst believes that merely looking at a chart or its past performance is not reflective of the current of the script or the market.
A fundamental analyst also considers factors like the product line of the company, the pipeline products, technology, niche markets, competition, policy, board of directors, mergers, exchange rates, basic ratios, free float shares and other factors that actually define the true worth of the company. Based on the company's value or worthiness, the script pricing is determined. Finally post comparison with its peers a conclusion is drawn to determine if a given script/sector or market is over valued or under valued.
Thus while technical analysis used historic performance and past behavioural data records to determine current and future trend in the market, fundamental analysis bases its prediction on economics, company value and other geo-political conditions. General perception believes that technical analysis is a better trend predictor for a shorter span of time to track intraday movements or weekly patterns, while fundamental analysis gives a more accurate outlook from a medium to long term perspective.
Fundamental analysis disregards technical analysis as being speculative and irrational. Fundamental analysis believes in determining the fundamentals of a company. This may be determined by the company's financial performance, statements, evaluation ratios (Please refer article on Basic Ratio's), order book, bottom lines, top line profitability and so on. A fundamental analyst believes that merely looking at a chart or its past performance is not reflective of the current of the script or the market.
A fundamental analyst also considers factors like the product line of the company, the pipeline products, technology, niche markets, competition, policy, board of directors, mergers, exchange rates, basic ratios, free float shares and other factors that actually define the true worth of the company. Based on the company's value or worthiness, the script pricing is determined. Finally post comparison with its peers a conclusion is drawn to determine if a given script/sector or market is over valued or under valued.
Thus while technical analysis used historic performance and past behavioural data records to determine current and future trend in the market, fundamental analysis bases its prediction on economics, company value and other geo-political conditions. General perception believes that technical analysis is a better trend predictor for a shorter span of time to track intraday movements or weekly patterns, while fundamental analysis gives a more accurate outlook from a medium to long term perspective.
