Differences between Fundamental Analysis and Technical Analysis

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Welcome To Dhanashri Academy
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Differences between Fundamental Analysis and
Technical Analysis
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The following are some of the differences between
fundamental and technical analysis.

• Value of Share
• Purpose
• Long-term Short-term Price Movement
• Finding the trend
• Assumptions
• Decision Making
• Usefulness

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1. Purpose
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Fundamental Analysis It seeks to forecast
stock prices on the basis of economic, industry
and company statistics. However, the most
important variables considered in deciding stock
prices are earnings and dividends. Technical
Analysis It mainly focuses on internal market
data.
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2. Long-term Short-term Price Movement
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Fundamental Analysis It seeks to predict
long-term values of securities. Generally, the
fundamentalist is a conservative who invests his
funds for a long term. Long-term investors buy a
high dividend paying stock and hold it for many
years through market fluctuations. Technical
Analysis The technical analysis determines the
short-term price movements of the securities. The
technician is a trader who buys and sells
securities for short-term profits. He gives
importance to total returns, i.e., the realized
price less the price paid, plus dividend received.
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3. Value of Share
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Fundamental Analysis The fundamental analyst
estimates the intrinsic value of shares and
purchases them when their market price is less
than the intrinsic value. He sells the shares
when the market value of shares is more than the
intrinsic value and earns profit. Thus, he works
on long-term basis. Technical Analysis The
technician believes that there is no real value
to any stock. According to him, stock prices
depend on demand and supply forces which in turn
are governed by rational and irrational factors.
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4. Finding the trend
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Fundamental Analysis In fundamental analysis,
there is no scope for finding out the past trend
of share and also the fluctuations in the price
trend. Technical Analysis Technicians believe
that past trend will be repeated again and the
current movements can be used for studying the
future trend. In other words, in respect of all
securities there are cycles and trends which will
occur again and again.
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Technical Analysis Under technical analysis,
charts and tools are used to compare various
price movements. The technicians view price
changes and their pattern mainly through price
and volume statistics and tools such as Dow
theory, Elliot Wave theory, pattern
identification moving averages, advance or
decline, charting styles, odd lots, short
selling, put or call ratio, relative strength of
indicators and Fibonacci levels.
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5. Assumptions
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Fundamental Analysis There are no assumptions
in fundamental analysis. Technical
Analysis Technical analysis works on the basis
of various assumptions which have been outlined
earlier.
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6. Decision Making
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Fundamental Analysis The fundamental analysis
carefully studies the financial statements,
demand forecasts, quality of management,
earnings, and growth. Then they judge the prices
of securities. Thus, the fundamental analysts are
making decisions based on their own (subjective)
opinions. Technical Analysis It listens to
what the market has to say. So, the view of the
market is the most important factor in
determining stock prices.
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7. Usefulness
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Dhanashri Acedemy is a well-known share market
courses and training institute in Mumbai. We are
conducting courses since 2008 and our teaching
skills of share market are gain by students from
past 5 years from which they have gain maximum
benefits and profits.
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For More Information Visit Our Website
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