Overview

Fundamental vs. Technical Analysis: An Overview

Fundamental and technical analysis are two major schools of thought when it comes to approaching the markets yet are at opposite ends of the spectrum. Investors and traders use both to research and forecast future stock prices. Like any investment strategy or philosophy, both have advocates and adversaries.

Fundamental Analysis

Fundamental analysis evaluates stocks by attempting to measure their intrinsic value. Fundamental analysts’ study everything from the overall economy and industry conditions to the financial strength and management of individual companies. Earnings, expenses, assets and liabilities all come under scrutiny by fundamental analysts.

Technical Analysis

Technical analysis differs from fundamental analysis, in that traders attempt to identify opportunities by looking at statistical trends, such as movements in a stock's price and volume. The core assumption is that all known fundamentals are factored into price, thus there is no need to pay close attention to them. Technical analysts do not attempt to measure a security's intrinsic value. Instead, they use stock charts to identify patterns and trends that suggest what a stock will do in the future.