Technical Analysis vs Fundamental Analysis

At the most basic level, a technical analyst approaches a security from the charts, while a fundamental analyst starts with the financial statements.

Technical analysis is a method of evaluating securities by analyzing the statistics generated by market activity. It is based on three assumptions:
1) the market discounts everything,
2) price moves in trends and
3) history tends to repeat itself.


Fundamental analysis is about using real data to evaluate a security's value. Although most analysts use fundamental analysis to value stocks, this method of valuation can be used for just about any type of security.

For example, an investor can perform fundamental analysis on a bond's value by looking at economic factors, such as interest rates and the overall state of the economy, and information about the bond issuer, such as potential changes in credit ratings. For assessing stocks, this method uses revenues, earnings, future growth, return on equity, profit margins and other data to determine a company's underlying value and potential for future growth. In terms of stocks, fundamental analysis focuses on the financial statements of the company being evaluated.