An overall view of technical analysis and how different it is from fundamental analysis.
Pros and cons of technical analysis.
- : Stock prices is driven by demand and supply. Prices changes very often due to the fluctuation in demand & supply levels
- : Fundamental - it is based on the company's performance and future plans. This is more of a insider information known only to the company's management. And it is not available for an outsider/common public
- : It is purely forecasting the direction of the market influenced by various trading strategies.
- : It is very reliable and accurate. But is not available to outsider / common public
- : Fundamental analysis required various company parameters like companies annual report(Revenue, Profit/ Loss), Assets, Growth plan, competition, R&D plan, Employee’s Satisfaction, Management, Various policies, Quality, etc. Technical analysis is based on demand and supply, which can be derived from traded Price and Volume.
- : News, earning and analyst report would influence the buyers & sellers of the market to increase the demand & supply. As the traders tend to act by immediate reaction on news/earning/analyst report.
- : The average turnover in NSE is approx. Rs.18000 Crores on a daily basis. Unless until it is a penny stock with less market capitalization it is really very difficult to manipulate the stock price to a larger extent.
- : Technical analysis is to study the market, market will reflects the situation first and no other data available for retail to perform fundamental analysis. Since it is based on demand and supply, it can be identified using Price and volume which is transparent to everyone. In technical analysis can only be follow the market trend. Which means, technical analysis will not help to sell at the top or buy at the bottom to get the maximum profit.
- : penny stocks are low prices and very volatile with high risk involved thus people avoid such stocks
- : Line, candle stick, bar, scatter, area, renko
- : Candlestick charts would help in determining the price patterns and the characteristics of demand & supply. Which is more reliable and accurate than any other charts.