A:

These terms refer to two different stock-picking methodologies used for researching and forecasting the future growth trends of stocks. Like any investment strategy or philosophy, both have their advocates and adversaries. Here are the defining principles of each of these methods of stock analysis:

  • Fundamental analysis is a method of evaluating securities by attempting to measure the intrinsic value of a stock. Fundamental analysts study everything from the overall economy and industry conditions to the financial condition and management of companies.
  • Technical analysis is the evaluation of securities by means of studying statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value but instead use stock charts to identify patterns and trends that may suggest what a stock will do in the future.

In the world of stock analysis, fundamental and technical analysis are on completely opposite sides of the spectrum. Earnings, expenses, assets and liabilities are all important characteristics to fundamental analysts, whereas technical analysts could not care less about these numbers. Which strategy works best is always debated, and many volumes of textbooks have been written on both of these methods. So, do some reading and decide for yourself which strategy works best with your investment philosophy.

(For additional reading, see Introduction To Fundamental Analysis and Introduction To Technical Analysis.)

RELATED FAQS
  1. Is it better to use fundamental analysis, technical analysis or quantitative analysis ...

    Understand the difference between fundamental, technical and quantitative analysis, and how each measurement helps investors ... Read Answer >>
  2. How does fundamental analysis differ from technical analysis?

    Learn about the differences between technical analysis and fundamental analysis, such as how these investment strategies ... Read Answer >>
  3. How legitimate are companies that advertise debt consolidation for all my credit ...

    Learn about how fundamental analysis ratios can be combined with quantitative stock screening methods and how technical indicators ... Read Answer >>
  4. Do you always have to consider intrinsic value when purchasing a stock? Why or why ...

    Take a deeper look at why value investors consider a stock's intrinsic value an important consideration before picking a ... Read Answer >>
  5. What items on the income statement are considered in fundamental analysis?

    Find out which items in the income statement are considered in fundamental analysis. How do investors use revenue, profit ... Read Answer >>
  6. What types of data are necessary to make a technical analysis?

    Understand what technical analysis is, the basic theory behind employing it and what data inputs are needed to conduct it. Read Answer >>
Related Articles
  1. Trading

    Technical Vs. Fundamental Investing - Friends Or Foes?

    Making money in the stock market has been likened to gambling by some, but experienced investors who do their homework usually profit by doing market analysis. However, even experienced investors ...
  2. Trading

    Understanding Fundamental Vs. Technical Analysis

    The methods used to analyze securities and make investment decisions fall into two very broad categories: fundamental and technical analysis. Learn the core differences in these strategies and ...
  3. Trading

    What Are A Stock's "Fundamentals"?

    The investing world loves to talk about fundamentals, but do you know what it means?
  4. Trading

    Fundamental and Technical Analysis for Pairs Trading

    Pairs traders employ either fundamental or technical analysis, or a combination of the two, to make decisions regarding which instruments to pair, and when to get in and out of trades. Many pairs ...
  5. Investing

    What Is Fundamental Analysis?

    Fundamental analysis is one of the basic ways to evaluate stocks. Find out what it is and how it can work for you.
  6. Trading

    Fundamental Analysis For Traders

    Find out how this method can be applied strategically to increase profit.
  7. Trading

    How to Identify Mispriced Stocks

    Find out how to identify mispriced stocks. Learn about intrinsic and relative valuation methods based on fundamentals, and technical analysis.
  8. Trading

    Blending Technical And Fundamental Analysis

    Find out how you can combine the best of both strategies to better understand the markets.
  9. Investing

    What Is The Intrinsic Value Of A Stock?

    Intrinsic value reduces the subjective perception of a stock's value by analyzing its fundamentals.
  10. Managing Wealth

    Use Price Action Trading Strategy for Results

    Bored by the fixed rules of technical and fundamental analysis? Price action trading allows you to customize your own trading strategy.
RELATED TERMS
  1. Fundamental Analysis

    A method of evaluating a security that entails attempting to ...
  2. Stock Analysis

    Stock analysis is a term that refers to the evaluation of a particular ...
  3. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  4. Technical Analysis of Stocks and Trends

    The academic study of historical chart patterns and trends of ...
  5. Large-Value Stock

    A type of large-cap stock investment where the intrinsic value ...
  6. Value Investing

    The strategy of selecting stocks that trade for less than their ...
Hot Definitions
  1. Put Option

    An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security ...
  2. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  3. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  4. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  5. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  6. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
Trading Center