- Stock traders use fundamental analysis and technical analysis to buy stocks.
- Fundamental analysis involves looking at a company’s business metrics such as revenue, earnings and debt.
- Technical analysis involves looking only at a stock’s recent price movements and identifying buy and sell signals in its chart.
- Technical analysis identifies price trends and chart patterns.
- Technical analysts believe past price changes carry over to future price movements. Traders depend on statistical trends in stock price and volume to predict future trends.
- Fundamental analysis evaluates securities by measuring intrinsic value.
- Technical analysts don’t usually care about value or what product or service a company sells; instead, they’re only interested in two things: stock price and volume.
- Technical analysts look for patterns in a stock’s chart that signal where its share price is heading.
- Modern technical analysis identifies a series of higher highs and higher lows as an uptrend while stocks making a series of lower highs and lower lows are considered to be in a downtrend.
- The concept that a trader can look at a pattern of past price performance and predict that pattern will continue is the backbone of technical analysis.
- Technical analysis focuses on examining price uptrends and downtrends in equities.
- Technical analysts learn to identify historical market patterns to predict forthcoming market trends and make decisions based on those predictions.
Personally, I use fundamentals to look for value stocks, then use technicals for entry to buy and exit to sell.
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Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation.
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He retired after 50 years of defending taxpayers audited by the IRS, EDD, BOE and other governmental agencies. He published a book on “How to Avoid or Survive IRS Audits” that’s available at Amazon. Readers may email tax questions to [email protected].