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Stock Market Analysis

There are two main types of stock market analysis utilized by investors. They include other concepts, some of which will be explained in this article. When performing analysis on the stock market, there are many factors to consider, but first you must decide which method you would like to utilize.  Stock market analysis includes fundamental and technical analysis. Investors will typically stick to one method or the other and will typically not use both in tandem.

Stock Market Analysis includes the concept of fundamental analysis. Fundamental analysis is the long-term assessment of a company’s financials in order to calculate how much the business is worth. This tells investors how much the company’s stock is worth to determine the potential shares the investor is willing to buy for that company. Investors who utilize this method also practice other concepts. These concepts include knowing the price to earnings ratio of a company, meaning that investors need to know what the company’s share price is compared to its earnings per share. Investors also need to know the dividend yield which is the company’s annual dividend payments and also need to know what the dividend per share divided by the price per share is for that company. There are other concepts included in this type of stock market analysis, but the main idea of fundamental analysis is bases on long-term investing.

Another form of Stock Market Analysis includes technical analysis. This type of analysis includes the forecasting of future financial price movements based on past price movements. This method can assist investors to anticipate what is likely to happen to prices over time. Technical analysts are not interested in the intrinsic value of a company but prefer to identify patterns that suggest future activity.  These investors use technical analysis tools, including the use of stock charts. The use of charts in this type of stock market analysis enables the investor to identify the underlying trends or stock chart patterns for that stock. They look for stock charts with rising trends and the familiarity with trend line formations can help to measure the overall attitude of investors towards stock and companies.

When performing technical stock market analysis the investor will take part and learn about stock charting.  When learning how to read stock charts the beginner investor should learn now to read four types of charts. Those include bar charts, line charts, point and figure charts, and candlestick charts. Many successful traders believe that candlestick chart patterns are the easiest and most beneficial to read. Unlike bar charts that illustrates what price movements did during a specific timeframe, candlestick charts reveal 'how' that price moved. Candlestick charts demonstrate what investor sentiment was doing during the timeframe and how it did it. This additional information creates a huge advantage for the candlestick investor when participating in stock market analysis.

When deciding which type of stock market analysis is right for you, please note that there are two arguments against stock fundamental analysis. The first is that a lot of the fundamental type of information is very subjective since it is based on each individual investor’s interpretation. The second reason is that stock technical analysis investors believe that fundamental analysis provides no real advantage. They believe this is due to the fact that all of the investing information is based on information that investors in publicly traded markets already know.

If you have decided to participate in stock market analysis, be sure you understand the advantages and disadvantages of both types. This will help you to make a decision as to which method you would like to practice.


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