Fundamental Analysis: What a Business Is Worth
Fundamental analysis studies a company's business and financial health. Analysts look at revenue and profit growth, margins, debt, return on capital, cash flow, management quality and the industry the company operates in. The goal is to estimate whether a stock's price reasonably reflects the value of the underlying business. It is usually associated with longer holding periods.
Technical Analysis: What Price Is Doing
Technical analysis studies price and volume history to understand market behaviour. Support and resistance, trends, moving averages and momentum indicators are common tools. Because it focuses on timing and price structure, it is widely used for shorter-term trading and for planning entry and exit levels.
Key Differences
- Time horizon: fundamentals suit months to years; technicals are often used for days to weeks.
- Data used: financial statements and industry data versus price, volume and charts.
- Main question: "Is this a good business at this price?" versus "How is the market behaving right now?"
Using Both Together
Many investors first shortlist companies using fundamentals and then study the chart to choose a more careful entry level and a stop-loss. Neither method is able to predict the future, and each can give conflicting signals.
Choosing Your Approach
Your choice should depend on your time horizon, risk capacity and how much time you can spend following markets. All equity investments carry market risk, and this article is general education, not an individualized research recommendation.
