What is the difference between basic analysis and technical analysis?
- ** Basic Analysis **:
The basic analysis examines economic and financial factors to determine the actual value of a company or being. This method of analysis takes into account the financial situation of a company, sector trends, economic indicators and other analysis factors. Basic analysis is often used to make long -term investment decisions.
- **Technical analysis**:
Technical analysis tries to predict future price movements using past market data and statistics. Technical analysis is often used to make short -term investment decisions.
These two methods of analysis are separated from each other in terms of focused data and results. The basic analysis aims to achieve results and earnings by examining all social, economic and political reasons that may affect the price of an investment product. Technical analysis only comes from the price tables.
Let us examine the differences between basic analysis and technical analysis in an in -depth:
- ** Basic Analysis **
It usually tries to determine the "real" or "right" value of a company or being. This is used to determine if a company's stock price reflect the real value of the company. If the stock price of a company is lower than the value determined as a result of the basic analysis, it can be concluded that this stock is "cheap" and should be taken. If the stock price is higher than the value determined as a result of the basic analysis, it can be concluded that this stock is "expensive" and should be sold.
- **Technical analysis**
It tries to predict future price movements by using past price movements and volume data. Technical analysis is usually performed using graphics and various technical indicators. Technical analysts believe that price movements create specific patterns and that these patterns can be used to estimate future price movements.
- ** Data Resources **:
The basic analysis usually uses wide diameter and various data sources such as financial statements, industrial reports, economic indicators. Technical analysis usually uses only price and volume data.
- ** Time investment **:
The basic analysis is often used for long -term investment decisions, while technical analysis is often used for short -term investment decisions.
- ** approach **:
The basic analysis often usually uses qualitative and quantitative data, while technical analysis usually uses statistical and mathematical models.
**Aim**:
While the basic analysis often tries to determine the "right" or "fair" value of an asset, the technical analysis often usually tries to predict the direction of price movements.
Both analysis methods come with their own powerful and weaknesses and are often used together. An investor can use technical analysis to estimate the real value of an asset and to predict price movements.
