Securities: fundamental analysis vs. technical analysis

Security Analysis is an indispensable demand in investment securities. Depending on qualifications, time and user demand, there may be a lot of research approaches, analysis and investment decisions are different for each individual security, or for the whole list investments in general.
Shares are securities primarily a need for investment analysis. Until now it has been summed up that there are two methods of analysis have been used commonly in most of the stock market (stock market) world, there is fundamental analysis and technical analysis cobalt. However, many investors are confused about the role and practical application of these methods. Therefore, understanding the nature of the two methods is necessary.
Fundamental analysis, technical analysis, or simply based on the updated information about the shares was announced investors have been able to achieve great success.
1. Fundamental Analysis
A method of analyzing stocks based on identifiable factors affecting platform or lead to a change in prices of shares in order to point out the intrinsic value (intrinsic value) of shares on the market.
Lodestar of investors in the school of fundamental analysis is to measure the true value of a company considered the financial indicators such as revenue growth, profitability; the risk that the company may encounter; ... The difference in the cash flow of the value compared to the real value of a company is the subject of investment opportunities or signs of profit taking stock.
Fundamental analysis is based on the following assumptions:
1. The relationship between value and financial factors that can be measured.
2. This relationship is stable over a long enough period.
3. The deviation of the relationship will be adjusted at the appropriate time.
Value is the primary goal of fundamental analysis. Some analysts often use discounted cash flows to determine the value of the company, while some people use price-earnings ratio (P / E) ...
The basic elements needed research include analysis of basic information about the company; analysis of financial statements of the company; analyze business operations of the company; industry analysts that the company is operating; and analysis of macro-economic conditions affecting the stock price. After the study, analysts have a duty to point out the predictions for the important indicators such as earnings expectations, the book value per share, the fair value of shares and the evaluation Important Recommendations and buy / sell shares on the market.
Specifically, the factors that need attention in the fundamental analysis of stocks are:
· Business activity of the company
· The objectives and tasks of the company
· Profitability (current and estimated)
· Demand for products and services of the company
· Competitive pressure and pricing policy
· Produce business results over time
· Results of business compared with the same company and the market
· Position in the industry
· Quality Management
In a general perspective, fundamental analysis can be used in methods of analysis of macroeconomic factors on the micro factors that affect stock (commonly known as top-down approach), including 5 levels as follows:
1. Analysis of the macroeconomic conditions
2. Analysis of the financial markets - the stock
3. Analysis of the industry that the company is active
4. Analysis company
5. Analysis of shares
dotcomtech.net In fact, depending on the objective and ability to analyze that analysts can use one of the five levels above analysis. For example, in an analysis of the company, we can use the method of non-financial analysis; That is the assessment of business management apparatus, human resources, ability to develop new products, markets and market share, competitiveness ... In analyzing the company, analysts can use approach is often called the SWOT method, with the identification and evaluation focused on the following aspects of the 04 companies:
· Strengths (Strengths)
· Weakness (weaknesses)
· Opportunities (Opportunities)
· Challenge (Threats)
A quick analysis of stocks, investors may classify stocks into 06 basic categories based on the nature of the income that it brings are: leading stocks (blue chips), growth stocks ( stability and boom), defense stocks, cycle stocks, shares seasonality.
Particularly in the core level and also the most difficult to analyze stocks, the nature of the basic methods of analysis here is the valuation of stocks to predict the intrinsic value of such shares. For this purpose, there are 05 common stock valuation methods are:
1. Method of valuation based on dividend flows
2. The method of valuation based on cash flows
3. The method of valuation based on P / E
4. The method is based on the financial ratios
5. The method of valuation based on net assets.
2. Technical Analysis
A method based on the graph, the graph of the price development and trading volume of the shares in order to analyze the demand and supply fluctuations on the stock to address immediate behavior on prices, ie only Analysts point to be bought or sold or hold shares in the market.
Those who pursue technical schools has always believed that volatile prices always fully reflect information, and the price of the stock Power-shift to the general trend of the market, and the most important thing is: history will repeat. Price and volume are two key variables of technical analysis and research on developments in history but technical analysts would make predictions for the future.
While values ​​play a major role in technical analysis are also many avenues to technical analysts can incorporate valuable elements in its analysis. For example, the value may be used decision support or resistance line on the price chart.
One of the great strengths of technical analysis is the proper use of it in any transaction method and on whatsoever for any time of the transactions. No part of the Stock Exchange or the derivatives that technical analysis is not applicable.
An analyst can use graph graph in any market and how many you want, but this is not possible with a person using fundamental analysis. This is due to the market each person applying fundamental analysis will have to handle a huge volume of data, it also speaks to why a fundamental analysis can only specialize in one or a small group certain securities - this advantage of technical analysis is not to be missed.
dotcomtech.net So technical analysts study relies on price movements of the stock market, and focused emphasis on behavioral changes in price and trading volume as well as the tendency of price and volume behavior there.
To perform technical analysis, required key assumptions are:
The behavior of any particular stock, or the stock market, which are related to changes in trends over time, which tends to be the main direction up or down of shares (or both market shares)
Price volatility is not a coincidence that they happened under the format that can be analyzed to predict future movements
Market volatility is reflected in the share price all
History is repeated due to the nature of man (investors) are unchanged so will repeat the same behavior before the same situation, and it led to repeated price trends.
To perform technical analysis, investors must rely on the image of the graph, in which the vertical axis denotes the stock price line and the horizontal axis denotes time, with types such as line graphs (line chart) , bar graph form (bar chart), or candlestick charts (candlestick chart). Through that technical analysts use technical analysis indicators commonly used as trend lines, trend channels, support levels and resistance levels, breakthrough, moving average, power index relatively, Bollinger ...
The methods and technical analysis tools are developed and become popular only since the beginning of the last century with the emergence of Dow theory (of Charles Dow) with the idea of ​​analysis is published for the first time Wall Street Journal magazine. Dow theory hitherto regarded as the basis for technical analysis methods with the most important indicator.
Comparison of two methods

 
 
Fundamental analysis as above purely based on the inputs and the ability to analyze subjective. Therefore, the same stocks can have multiple outcomes to identify and analyze different, and fundamentals are often ignored factors considered investment sentiment. However, fundamental analysis is a method of leading and indispensable in equity investment analysis and as a basis for a relatively stable investment decisions. Approximately 90% of investors use fundamental analysis (Arshad Khan and Vaqar Zuberi, 1999, Stock Investing for Everyone, page 85). Therefore training programs world renowned investment analysts is a CFA (Chartered Financial Analyst - common in the US) and CIIA (Certified International Investment Analyst - common in Europe) is also fully contain internal service solution for fundamental analysis and not include content and technical analysis.
Towards technical analysis, so this method is based on changes in the behavior of the stock, so there are short-term instruments and should not be used for long-term analysis. However, technical analysis also attracted a significant number of private investors to use. In many countries, analysts in the school of technical analysis often converge in the Association of Technical Analysis Market (Market Technicians Association) and also organizes standardized tests and technical analysis programs Works was called CMT (Chartered Market Technician)
Some scholars said that fundamental analysis studies the causes of stock price volatility on the market to answer the question "why do happen and what happens in the stock price," also analyzed Technical study its effects to answer the question "when changing stock prices will start and when to end." In other words, technical analysts need to know what the effect is, without attention to the reason why it leads to a situation; fundamental analysts also always need to know why. (John J. Murphy, 1999, Technical Analysis of the Financial Markets, page 5)
Investment perspective, the combination of both fundamental analysis and technical analysis may seem to bring the best combined results. That requires time, understanding and analyzing significant level of investor and that's not really a job easily.
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3. Information
Prices rise and fall depending on the information about the company. Investors make decisions to buy / sell shares of a company based on information published by that company, buying on good news and selling on bad news. This investment approach requires investors to obtain information (based on the relationship to grasp new information or self-prediction information) and to estimate the response of the market.
For home-based business research information, the relationship between the information and the price change is more important than the study of values. Therefore, traders can buy a company whose price exceeds the true value based on the belief that the next information is good information, exceeded expectations and will push the price up.
Besides the three schools - representing 3 analyzing stock options this major investment, the investor can rely follow some other method. Such as stock options based on personal knowledge about the company (employees buy shares of their company), purchased shares under a general market trend, ... and investors should refer more method that can avoid mistakes when making investment decisions
Whether short-term investments and long-term , both methods are equally important because if fundamental analysis help us determine to purchase shares does technical analysis helps us determine when to buy and sell better most . However , normal , long-term investors or using fundamental analysis, while short -term investors (usually speculators ) are more inclined to use technical analysis .