How Technical Analysis differs from Fundamental Analysis?
A. While technical analysis concentrates on the study of Market Action, fundamental analysis focuses on the economic forces of supply and demand that causes prices to move higher, lower or stay the same. The fundamental approach examines all the relevant factors affecting the price of a market to determine the intrinsic value of that market. The Intrinsic value is what the fundamentals indicate something is actually worth based on the supply of law of supply and demand. If this intrinsic value is under the current market price, then the market is overpriced and should be sold. If the market is below the intrinsic value, the market is undervalued and should be bought. Both these approaches to market forecasting attempt to solve the same problem that is, to determine the direction, prices are likely to move. They just approach the problem from different directions. The Fundamentalists studies the cause of the market movement while the technical analyst studies the effect.
Related Questions
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- How Technical Analysis differs from Fundamental Analysis?
