Trading and investing in the share market requires more than just intuition—it requires insight. Two of the most trusted methods to analyze stocks are Technical Analysis and Fundamental Analysis. Both serve distinct purposes and can help traders and investors make better decisions. But which one should you use? The answer depends on your goals, strategy, and time horizon. In this blog, we’ll explore what each method means, how they differ, and how you can decide which is right for you.
What is Fundamental Analysis?
Fundamental Analysis involves evaluating a company’s intrinsic value by examining related economic, financial, and other qualitative and quantitative factors. This method is commonly used by long-term investors.
Key Components:
- Company Financials (Balance Sheet, Income Statement, Cash Flow)
- Management Efficiency
- Competitive Advantage
- Industry Performance
- Economic Indicators
- Earnings Reports
- Dividend History
Example:
If you’re analyzing a company like Infosys, you might review its revenue growth, net profit margin, and return on equity over the past few years to determine if the stock is undervalued or overvalued.
Who Uses It:
- Long-term investors
- Value investors like Warren Buffett
- Portfolio managers
What is Technical Analysis?
Technical Analysis focuses on historical market data, primarily price and volume, to forecast future price movements. It’s used mostly by short-term traders.
Key Tools and Indicators:
- Candlestick Charts
- Moving Averages (MA, EMA)
- Relative Strength Index (RSI)
- Bollinger Bands
- MACD (Moving Average Convergence Divergence)
- Volume Analysis
- Support and Resistance Levels
Example:
A day trader might buy a stock when the RSI indicates it’s oversold and sell it when it reaches an overbought level.
Who Uses It:
- Intraday traders
- Swing traders
- Momentum traders
Key Differences Between Technical and Fundamental Analysis
| Criteria | Fundamental Analysis | Technical Analysis |
|---|---|---|
| Time Horizon | Long-term | Short-term to medium-term |
| Focus | Company value & performance | Price movements & chart patterns |
| Tools Used | Financial statements, ratios | Indicators, charts, patterns |
| Objective | Identify undervalued stocks | Predict price movements |
| Strategy Type | Investment | Trading |
Pros and Cons
Fundamental Analysis
✔ Pros:
- Long-term perspective
- Helps assess company’s actual worth
- Good for building wealth gradually
✖ Cons:
- Time-consuming
- Not suitable for short-term trading
- Market sentiment can outweigh fundamentals in the short run
Technical Analysis
✔ Pros:
- Helps in identifying entry and exit points
- Quick decision-making
- Useful for any market: equities, commodities, crypto
✖ Cons:
- Can give false signals
- Requires constant monitoring
- Doesn’t consider company health
Which Should You Use?
It depends on your trading style:
- If you’re a long-term investor focused on wealth accumulation, Fundamental Analysis is ideal.
- If you’re a short-term trader looking to capitalize on price swings, Technical Analysis is more effective.
- Many successful traders and investors use a combination of both—using fundamentals to select the right stocks and technicals to time the trade.
How Arkstrade Helps
At Arkstrade, we believe in empowering traders and investors with the best tools. Whether you rely on fundamental data or use advanced technical charts, our platform offers:
- Real-time market insights
- Advanced charting tools with custom indicators
- Company financials and news updates
- User-friendly interface for both beginners and professionals
Explore both sides of analysis and make smarter decisions with Arkstrade.
