Types of Analysis: Fundamental or Technical or Mood Analysis
Many people have asked me this question What is better... Fundamental Analysis or Technical Analysis?
Have you at any point of time pondered on this...?
From the chart itself you might have understood my view point
I think of Fundamentals being the Heart of anything....
- It tell us what the economic growth is ( that can be Compared with other economies)
- which sectors are doing well
- which Companies are market leaders in their industry and so on...
This tells us where to invest and where to avoid from long term perspective.
Technical Analysis is more of a rational approach (Mind) with believing what you see....
- what is the trend like
- is there any chart pattern that is telling me something
- Price action at any particular level
This tells us at any given price what is my Risk::Reward ratio from short term to medium term perspective
then there is another dimension
Mood Analysis which factors in how markets react to specific NEWS or event in that particular moment (Mood analysis can be further divided in to 2 types - Qualitative in the sense it cannot be measured) and Quantitative ( Derivatives Open Interest Data Analysis which can be measured)
This could be helpful for an ultra short term perspective like intra day or BTST or trade for a week kind of approach.
All three have their own significance and have their own limitations. Don't limit your views here...
Just like in any organization, there are various departments like Sales department, Accounts department, Operations department, IT department, HR and so...
They all have specialization in their respective field but need some skills of other departments
For example
A Sales Manager's core skill is Sales but will require skills of Human Resource to manage his team, Budgetary skills to manage expenses, device incentives and reward structures
Finance Head will require Selling skills to pitch investment ideas to potential investors
HR Manager will require Budget planning skills to forecast overall Work force Salary expenses, Selling skills probably to attract potential candidates to work in their Company and so on....
When it comes to Market, One needs to understand himself / herself first and answer the following questions
- what is the timeframe you are looking to stay invested?
- Why are you in the market - objectives for investing / trading?
- how much time you can devote?
- how much risk you are willing to take?
Once you do this exercise and find our these answers, you can understand what type of analysis would suit you best.
One can focus on any 1 particular stream like Fundamentals or Technical as the core path to analyzing investment opportunities and can support that with other parameters...
For eg
One can follow Technical Analysis as core and then look at Derivatives Data to support his / her view...
My answer to the above question what type of Analysis is best is very simple:
Shift your mentality from who is right and who is wrong to what can work best for me... and focus all your thoughts, energy and resources in that direction
All the best and happy learning 👍
Have you at any point of time pondered on this...?
From the chart itself you might have understood my view point
I think of Fundamentals being the Heart of anything....
- It tell us what the economic growth is ( that can be Compared with other economies)
- which sectors are doing well
- which Companies are market leaders in their industry and so on...
This tells us where to invest and where to avoid from long term perspective.
Technical Analysis is more of a rational approach (Mind) with believing what you see....
- what is the trend like
- is there any chart pattern that is telling me something
- Price action at any particular level
This tells us at any given price what is my Risk::Reward ratio from short term to medium term perspective
then there is another dimension
Mood Analysis which factors in how markets react to specific NEWS or event in that particular moment (Mood analysis can be further divided in to 2 types - Qualitative in the sense it cannot be measured) and Quantitative ( Derivatives Open Interest Data Analysis which can be measured)
This could be helpful for an ultra short term perspective like intra day or BTST or trade for a week kind of approach.
All three have their own significance and have their own limitations. Don't limit your views here...
Just like in any organization, there are various departments like Sales department, Accounts department, Operations department, IT department, HR and so...
They all have specialization in their respective field but need some skills of other departments
For example
A Sales Manager's core skill is Sales but will require skills of Human Resource to manage his team, Budgetary skills to manage expenses, device incentives and reward structures
Finance Head will require Selling skills to pitch investment ideas to potential investors
HR Manager will require Budget planning skills to forecast overall Work force Salary expenses, Selling skills probably to attract potential candidates to work in their Company and so on....
When it comes to Market, One needs to understand himself / herself first and answer the following questions
- what is the timeframe you are looking to stay invested?
- Why are you in the market - objectives for investing / trading?
- how much time you can devote?
- how much risk you are willing to take?
Once you do this exercise and find our these answers, you can understand what type of analysis would suit you best.
One can focus on any 1 particular stream like Fundamentals or Technical as the core path to analyzing investment opportunities and can support that with other parameters...
For eg
One can follow Technical Analysis as core and then look at Derivatives Data to support his / her view...
My answer to the above question what type of Analysis is best is very simple:
Shift your mentality from who is right and who is wrong to what can work best for me... and focus all your thoughts, energy and resources in that direction
All the best and happy learning 👍
