Type of stock market analysis

 Types of Analysis

(Types of Stock Market Analysis)

Among the various types of analysis of shares, there are two main types on the basis of which successful investing is possible.

Technical Analysis

Fundamental Analysis

Our endeavour should be to understand both types of analysis and gain good benefits.

Fundamental Analysis:

Now let us briefly discuss fundamental analysis. In this type of analysis, based on the balance sheet showing the profit and loss of the company, it is judged whether the shares are suitable for investment or not. This type of analysis helps us to measure the quality of any company.

Most people say that once you invest after checking the fundamentals of the company, it is beneficial. This definitely happens in long term investments because the price of a company that gives good results all the time definitely increases. But people who invest for a short time may have to face a difficult situation if they invest in a company based only on its results. Because it is not necessary that good results will come soon. Therefore, if you have to invest for a short time, it is beneficial to use technical analysis.

To understand it in another way, it can be said that if shares of a company are a vehicle, then the fundamentals of that company are the fuel of that vehicle and technical analysis is the driver of that vehicle.No matter how good a car is, if the quality of fuel used in it is poor, the car cannot run properly. Also, if there is no good driver, the car cannot run smoothly.

Now, on the basis of the fuel of the vehicle i.e. positive forces, it can be said that the vehicle can cover a good distance, but how fast it will run, where it will stop, from where it will turn and then move ahead, how many turns it will take on the way, all this depends on its driver.

Just as whether a vehicle is fueled with plain petrol or high-octane petrol affects the efficiency of the vehicle. Similarly, the movement of shares of a company that gives good results can be straight and long. Try to find shares of a company with such a combination. With the help of technical analysis, many times, profit can be made in a short time even in ordinary shares after checking various levels. Therefore, the answer to the question of what should be done in which situation can be found by studying technical analysis.

The thing to understand is that a good driver is needed for a good car. In any case, if a driver has to choose between a junk car and a Mercedes, he will prefer the Mercedes. In the same way, good shares seem to have the power to move automatically.

To identify a vehicle whether it is a Mercedes or a junk you have to take the help of fundamental analysis. Depending on the technical parameters like the driver, a Mercedes can run as well as a junk. But when bad times come, if you are sitting in a Mercedes then you face less trouble. But a junk can betray you and there is a possibility of something untoward happening to you.

In a bad environment, the speed of the good shares like Mercedes is seen slowing down but the junk car is mostly seen falling into the category of loss and it is possible that no driver would be ready to give it a hand.Just like when you are in a Mercedes, you experience less discomfort when the road is not good. Similarly, in a market turmoil, good stocks experience less turmoil than other stocks and even during such times, the effect on them is as good as none.

If an accident happens while you are in a good car, there is less risk to life. But if an accident happens while you are in an ordinary car, your life can be in danger. Similarly, if the price of good shares falls, it becomes the same soon with time. But when such a situation arises in bad shares, then your hard-earned money can go waste.

Therefore, before taking an investment decision, keep aside good quality shares on the basis of fundamental analysis. After that, investment should be made only after technical analysis clarifies important factors like the beginning of its trend correction and its uptrend etc. One should not run after cheap shares. One should always focus more on quality.

Technical Analysis:

The study done on the basis of charts of various shares is called technical analysis. Such charts work like a 'map'. If you start driving and go on an unknown road without a map, then there is a fear of getting lost and going on the wrong path. Similarly, if you invest without studying the charts, it is like shooting in the dark. Technical analysis gives you a picture of the situation in any share and helps you in timing. Studying the charts is very important for those who are short-term traders, especially for short-term investors.

For example, in long term investments, as long as the significance level is met, the short term fluctuations seen in it can be ignored. But for short term traders, it is important to keep them informed.There should be a knowledge of where the support for the fall is and where the resistance for the rise is. All this information can be obtained from the chart. If you know the various levels after systematic study of the chart and trade accordingly, then the chances of loss are negligible and the margin of profitable trading increases.

If you consider the stock market to be like a battlefield, then technical analysis is used as a weapon. We all know very well what the result will be if we try to fight unarmed on the battlefield. Similarly, entering the stock market without mastering technical analysis is like going to the battlefield without weapons. Doing this may not be bravery but it may definitely prove to be stupidity. Therefore, it is very important to master technical analysis as much as possible in the stock market. If you suffer a loss by not doing this, then the fault is not of the market or anyone else but of you.

Why is more emphasis given on technical analysis only?

Investing based on company fundamentals can also be risky, as you have seen recently. Companies can make their share prices sky high by showing false profits and once the truth comes out, their shares can come down to the ground.

No one can answer the question of what it feels like at such a time. At such a time that question has no meaning. But if you look at the chart, then if any important level is broken, you get to know about it very quickly and at that time, without thinking about anything else, you should get out of that stock. That is in your best interest.

Not all companies deal with such accounts. Therefore, we should not underestimate analysis. We have to keep both together to get good results and keep in mind that wrong decisions will not be taken by getting influenced by any one Method the thing is that no matter how good the fundamentals look, the difficulties involved are mostly gauged by the charts. You may be sitting in the best car in the world, but when you see it break down and stop, you do not have time to think how did this happen or how is it not possible. You should get out of it immediately.

The basic foundation of technical analysis is available on the study of charts constructed based on the fluctuations in the share prices of any company.

Whether it is worth investing at any given time is determined by looking at various types of charts and the various indicators used with it.

The price of a stock in a given time frame can also be followed by long term investors by keeping an eye on its short term top and bottom, in the long term trend. In which the shares have to be held keeping in mind the long term support only, when the trend of this long term reverses, one should exit the shares by taking the profit available in the shares. If there is lack of time in it, then one should stay away from trading short term. It is a matter of one's convenience. Rest technical analysis provides you all the opportunities.

How much can the price of a particular stock rise at any given time, where can the fall take support, at what level can the resistance come after the rise, how much more possibility there is for the price to rise, etc. can be known by analysing the charts and the formations formed in them.

If such various forces are taken into account and the buy and sell signals obtained on the basis of them are followed properly, then one can earn good profits in the long run.Just like you follow the rules of traffic signals, in the same way by following the signals received on the basis of technical analysis, losses can be avoided.

In this type of analysis, you must have the skill to analyze the various signals that come in the changing situation. It is also important to have the habit of using such a signal properly when you get it.

By using technical analysis you can increase your profit potential by getting entry and exit signals at the right time.

You can earn profit by keeping the investment in a good stock intact for many years. But if you understand the various cycles and formations that are formed with time, you can take advantage of them. The profit you get can increase manifold in terms of percentage.

Always keep in mind that entering the market without the knowledge of technical analysis is like shooting an arrow in the dark.

To put it another way, entering the stock market without this information is like entering the battlefield without weapons.

Keeping in mind the manipulation that happens in the market, we can say that investors without this information always incur losses and blame the market for it.

As said earlier, this market is a battlefield. But if you expect victory without the protective shield of knowledge and weapons, then it is not possible.

This knowledge is like light in darkness.