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The Fundamental Analysis aims at finding the right intrinsic value of the stock and the right valuation whereas the Technical Analysis aims at finding the right entry and exit signal for a stock.

The Fundamental Analysis analyses the Financial statements such as Profit and Loss Statements, Balance Sheets, Cash Flow statements the Technical Analysis is based on three assumptions that the market discounts everything, price moves in trends, history tends to repeat itself.

The Fundamental Analysis analyses the broad market scenario including the future growth of the company in the socio-political-economic climate whereas the Technical Analysis analyses the Supply and Demand and the reaction of price to variation in Supply and Demand.

The Fundamental Analysis employs the Ratios and other parameters to determine the overall health of the Company and attempts to project the future based on it. The Technical Analysis studies the Support, Resistance, and Volume to comprehend the Price Behavior at a given point in time.

The Fundamental Analysis is very useful for long-term investments and has very limited use in short-term trades whereas The Technical Analysis is very Useful for Intra-Day and Short-Term Trades.

The Fundamental Analysis checks the quality of the stock and its proper valuation. Thus “What Stock to buy or sell?” becomes a primary question in the Fundamental Analysis. The Technical Analysis does not consider the quality of the stock as a prime criterion and only considers whether there is a favorable setup for a good trade. Therefore, “When to buy or sell?” is the primary question in the Technical Analysis.

Verdict:

“Fundamental Analysis vs Technical Analysis” has been a quintessential question. However why it has to be One Vs the Other. In my view. A good Trade only involves five elementary questions namely,

  • Which Stock to enter?
  • What Price to enter?
  • How long to hold?
  • What Price to book Profit?
  • What Price to stop the loss?

To find out the answer to the said questions, both Fundamental Analysis and Technical Analysis have to work in tandem. It is not about “This or It”. It is about “This and That”. Both the analysis in isolation can only provide half the picture. Therefore the very one vs the other goes and it has to be “Fundamental Analysis and Technical Analysis”.

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