I’ve been learning about the stock market and often come across two major approaches =Fundamental Analysis and Technical Analysis.
From your experience:
Which one is easier to learn and apply?
Which approach gives better results in the long run?
Is Fundamental Analysis better for investing and Technical Analysis better for trading?
Can someone become consistently profitable using only one of them?
Do you think a combination of both Fundamental and Technical Analysis gives the best edge in the market?
Is there any situation where using both together consistently outperforms relying on just one approach?
Which would you recommend starting with and why?
Would love to hear insights from traders, investors, and anyone who has experience using either approach or both.
Both will work if you are experienced in it. Fundamental analysis doesn’t mean just being able to read the statements or rating agencies’ reports. For example, If you work in that industry and know the trends you can use it to your advantage. Technical analysis is the same - it’s just not being able to identify a pattern here and there or draw the trend lines. It’s knowing the ins and outs of your strategy, of your patterns and setup, position sizing and risk management.
In both it’s not superficial knowledge, but in depth knowledge. No knowledge is better than half knowledge.
I would suggest starting with Fundamental Analysis first, as it helps you understand how a company really works and what makes it strong over the long term. Once you are comfortable with that, you can learn Technical Analysis to better time your buying and selling decisions.
Q1. Why do you want to learn about the stock market?
Q2. How much time do you have?
Long version...
To learn,
Pursue whichever you are able to consistently spend time and stick-to for several months / few years.
To earn,
Do both. All the time.
Cannot? Not enough time?
There you go… Congratulations!
Armed with this single bit of insight,
you are now one step ahead of the rest of the folks trying to make money from the markets.
Since, not enough time,
do as much of the learning above,
and while you are at it,
invest your capital into passive instruments and diversify.
cannot subdue the “itch” to actively participate in financial markets?
Use your convictions to bias a small percent (say 10-15) of your passive portfolio,
rebalance each year, and whenever the “itch” needs scratching.
Doing all this already? Excellent
The general consensus, without knowing anyone’s specific circumstances,
is that it is almost always extremely likely that
there are other activities that one can pursue
that offer a higher chance of higher financial returns,
for the time that one can afford to invest.
Do you have any marketable skill? (or expect to gain any?) or be socially productive in any manner?
IMHO, for most folks, the better RoI of one’s time is investing in oneself to learn a vocation and be productive.
Oh, but participating in financial markets IS your skill-set, you say?
To be consistently effective, in addition to FA and TA,
i hope your particular set of skills include -
risk-management, asset-allocation, position sizing, …
understanding execution-impact, taxation, other charges, …
< and a reasonable level of expertise in a dozen other activities you come across while doing the above >
…and at the end of it all, have significant capital to deploy,
to make any meaningful difference financially.
So, one way to get the “best of both worlds”
is to pursue such financial awareness while one is productively engaged in other pursuits,
and is earning an income not linked to the markets
and contributing to building-up one’s capital.
Still working on your ability to ignore the high-risk-potentially-high-reward asset-classes?
While you work that out, maybe can deploy a barbell
with a tiny part of your portfolio invested in / exposed to such risky assets.
Find yourself in quite different circumstances than the ones described above?
Go ahead… What’s different?..
None of these things work, to be frank. These things are hatched by book and course sellers to bludge your parents’ hard-earned money. But yeah… there has to be something that does work, and there are a few retailers (probably less than 1%) who make use of that thing every trading day [I can give examples].
The trick is to keep looking. And you’ll only keep looking if your brain steers clear of all this horseSh*t.
P.S. I am an intraday index option buyer. Whatever I said above may or may not hold true for other instruments or trading styles.
Always remember to do fundamental analysis before investing, you need to under stand how the business operate, how are they generating revenue and look for opportunity to hold long term or shorter term. Technical analysis is also good, but for more frequent and short-term positions, and when you are taking / selling you long-hold positions.
FA is useful when you are trying to understand the business. TA is useful when you need timing and a clear invalidation point. The bigger mistake is using either one without a risk plan.
Thanks for the disclaimer as I was about to reply based on your first lines. “none of these …” but then the disclaimer was appropriate.
However, how do you decide on a stock, toss a coin and decide to buy. Vedanta taught me integrity of owners and to study on them which earlier I thought was bullshit. PSU taught me of opportunity cost in investing. Other than FA is there any other method to decide. if so please let me know.
Just recently i realised that total volume of outstanding shares is an important aspect as well - The importance of PE ratio. In college they used to teach - Current Ratio of 2:1 is great (accounting students will know this) . I used to look at this ratio PE - this way. Nowadays I am checking each one of the ratio and trying to understand it in depth.
I find it very strange that even without knowing what the company does, people are willing to invest. I am sure just by name no one will decide to buy or sell a company. i am talking from a pure INVESTING Perspective. If people go my market price then TCS should be a defenite buy. Yesterday it went up by 150 to 200 and today it fell by the same amount. Wonder whats going on in this company. Owners share of TCS is 72%, hope they dont do a delisting at the lowest level… (once bitten twice shy feeling - first was Vedanta…)
Disclaimer: I am an investor, i.e buy shares in cash segment and hold it and sell it and repeat once i have identified the stock. Whatever I said above is applicable only to me may or may not hold true for other instruments or trading investing styles.
PS: Thanks once again for the profile picture of mine…
Cannot? Not enough time?
The general consensus, without knowing anyone’s specific circumstances,
