Technical analysis is the study of past market data, primarily price and volume, to predict future price movements of stocks. Traders use charts, patterns, and various indicators to understand market trends and make decisions. The focus is on the behavior of the market and stock prices over time, rather than the company's actual performance. This method is often used for short-term trading, helping traders decide when to buy or sell based on market patterns and trends.
Fundamental analysis , on the other hand, looks at a company's financial health and overall business performance. This includes studying earnings reports, revenue, profit margins, management quality, and market conditions. Investors use this approach to determine the long-term value of a company and assess whether its stock is undervalued or overvalued. Fundamental analysis is ideal for long-term investing as it focuses on a company’s growth prospects and overall stability.
While technical analysis technical analysis helps identify opportunities for short-term trades, fundamental analysis focuses on building a portfolio for long-term growth. Both methods are useful, and many investors combine them to make more informed decisions based on both market trends and company performance.