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 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 >>
  3. 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 >>
  4. 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 >>
  5. What are the most popular forms of technical analysis?

    Technical analysis approaches the market by studying price and volume. It yields radically different insights and conjectures ... Read Answer >>
Related Articles
  1. Investing

    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. Investing

    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. 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.
  4. Investing

    Blending Technical And Fundamental Analysis

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

    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.
  6. Trading

    Introduction to Types of Trading: Technical Traders

    Learn about the different traders and explore in detail the broader approach that looks to the past to predict the future.
RELATED TERMS
  1. Fundamental Analysis

    A method of evaluating a security that entails attempting to ...
  2. Technical Decline

    A technical decline is a fall in the price of a security caused ...
  3. Fundamentals

    The qualitative and quantitative information that contributes ...
  4. Large-Value Stock

    A type of large-cap stock investment where the intrinsic value ...
  5. Upside

    The potential dollar or percentage amount by which the market ...
  6. Modified Cash Basis

    An accounting method that combines elements of the two major ...
Hot Definitions
  1. Portable Alpha

    A strategy in which portfolio managers separate alpha from beta by investing in securities that differ from the market index ...
  2. Run Rate

    1. How the financial performance of a company would look if you were to extrapolate current results out over a certain period ...
  3. Hard Fork

    A hard fork (or sometimes hardfork) is a radical change to the protocol that makes previously invalid blocks/transactions ...
  4. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  5. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
  6. Zero Day Attack

    Zero Day Attack is an attack that exploits a potentially serious software security weakness that the vendor or developer ...
Trading Center