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The Main Tools of Fundamental Analysis

This approach seeks to uncover the intrinsic value of a security, such as a stock or currency, using these main tools:

Financial statements: These include a company's income statement, balance sheet, and cash flow statement, which provide a financial snapshot and help assess its profitability, liquidity, and solvency. Analysts use these to determine financial ratios, multiples, and other mathematical representations of a firm's financial health.
Economic indicators: Macroeconomic indicators like gross domestic product growth, inflation, and unemployment rates are used to understand the economic environment in which a company operates. These indicators can affect consumer behavior and, therefore, a company's performance.
Interest rates: Central bank interest rates can significantly affect an investment's value. Higher interest rates generally lead to lower stock prices, while lower rates boost stock prices.
News and events: Company news, such as earnings reports, new contracts, and regulatory changes, affect stock prices.
Qualitative information: This includes details about management quality, industry cycle, competitive advantage, and other non-quantifiable factors that affect a company's stock.

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What Is Technical Analysis?
Technical analysis evaluates financial assets, such as stocks, currencies, or commodities, by reviewing the historical price and volume data. Unlike fundamental analysis, which focuses on the intrinsic value of an asset, technical analysis examines the volume and price of shares over time.

Simplifying more than a little, where those using fundamental analysis portray themselves as the sober-minded investigators uncovering real value in the economy, those who use technical analysis start from the view that markets are inefficient and price patterns and trends in market data can be exploited for potential profit.

Fundamental and technical analyses are the major schools of thought for approaching the markets.
The Main Tools of Technical Analysis
Here are the tools most often used in technical analyses:

Technical analysis indicators: These are mathematical calculations based on price, volume, or open interest to predict future prices. The indicators are generally based on momentum or mean reversion.
Volume analysis: This studies the number of shares, lots, or contracts traded in a security or market during a certain period.
Relative strength: This metric compares the performance of an asset to a benchmark to gauge its momentum.

Chart pattern analysis: The study of price movements in a market pinpoints patterns that can suggest future activity.

Candlestick pattern analysis: This kind of financial chart used for price movements could indicate investor sentiment, market trends, or reversals of those trends.

CFI. "Candlestick Patterns."

Support and resistance: These are horizontal lines drawn on a price chart to indicate where a security's price will be unlikely to move beyond.

Trend analysis: This is interpreting past and present moves in the market to predict future asset prices. Historical prices and trading volume are the most often used.

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