When I first started studying the stock market, I often heard people discussing two big approaches: fundamental analysis and technical analysis. At first, I thought I had to pick a side — either study company reports and financial ratios or just look at price charts. But the more I learned, the more I realized that the smartest investors actually use both together.
So, what’s the difference?
Fundamental analysis is about understanding the true value of a company. Things like revenue, profit, PE ratio, and whether the business has growth potential. It’s like reading the company’s medical report.
Technical analysis focuses on price and market behavior. Support, resistance, candlestick patterns, and indicators like RSI or MACD. It’s like checking the heartbeat of the market.
Why not stick to just one?
Here’s what I learned:
- Fundamentals tell you what to buy.
- Technicals tell you when to buy or sell.
If you rely only on fundamentals, you might choose a great company but enter at the wrong time. If you rely only on technicals, you might follow a strong chart but in a weak company. That’s why combining both makes sense.
My takeaway this week
As I reflected on these concepts, it clicked for me: blending fundamentals and technicals gives me more confidence. Fundamentals help me avoid weak companies, and technicals help me avoid bad timing. It’s like having two powerful tools instead of just one.
Final thought
Smart investors don’t see it as fundamental vs technical. They see it as a partnership. One shows the value, the other shows the timing. Put them together, and you have a stronger, more reliable strategy.