Investing in success, making money in stocks and accumulating wealth is everyone’s main goal. Achieving this ultimate goal of retirement security requires an investment strategy that will make your money work hard for you while avoiding excessive risk, failure, and loss. Technical analysis and fundamental analysis are the two key points for financial success, but they differ significantly in their approach to investing.
The fundamental analysis focuses on the financial statements, the actual data of the evaluated company. To assess the value of shares, fundamental analysis uses earnings, profits, future growth, return on equity, profit margins and other data to determine the company’s core value and potential for future growth. Although fundamental analysis is important, most investors do not have the experience, desire or time to look at a company’s financial performance to determine if it would be a good investment or not. And with the accounting jokes that some companies use to cook books, the basics may seem useless.
Technical analysis, on the other hand, is a method of valuing securities by analyzing statistical data generated by market activity, such as past prices and volume. Some technical analysts do not try to measure a company’s intrinsic value, but instead use charts and other tools to identify models that can predict future price movements. The technical analysis was introduced more than 100 years ago by Charles H. Dow from a series of editorials in the Wall Street Journal that he authored and later became known as The Dow Theory. The main factors of his theory have been valid for more than a century and are the basis of technical analysis today. Dow believed that the market was shrinking everything and this information was reflected in the movement of prices not only in the whole market but also in individual stocks. Immediate access to news in today’s world confirms the fact that everything is really reduced in stock price and market movement.
However, a wise investor must always use a double approach to be successful. In other words, use a little common sense. The basic, familiar basics of a company are easily accessible and disclosed in the cost-to-earnings ratio (PE) and earnings per share (EPS). To avoid companies without real profits, make sure that the EPS and PE ratio are consistent before you put your hard-earned money at risk. Then, with proper knowledge of the technical analysis of the company and the whole market, a really wise investment decision can be made.
There is an old saying: “If you want to know the truth, follow the money.”
True; graphs are the imprint of money. The technical analysis of the charts not only reveals the current and past performance of the shares, but also the price action gives the chartist a clear idea of market sentiment and a valuable idea of the future direction. All the necessary information is shown in the diagram. Price, volume, support, resistance, trends and much more. It is simply a matter of knowledge in the correct interpretation of the information. Charting and Technical Analysis uses the basis of The Dow Theory and applies modern charting techniques to give the investor a clear advantage. In this way, the informed investor can limit the risk and invest in the most appropriate moments, avoiding market downturns, market adjustments and bear markets. Using time-tested analysis, easily accessible basics and some common sense, the individual investor can be successful in any market.