Stock market analysis is the act of evaluating securities, including stocks, bonds and commodities, to form an opinion about future price movements. This includes fundamental analysts who determine the value of a security based on earnings or dividends. In contrast, technical analysts predict price movements by examining past market data such as prices and volume.
The primary purpose of stock market analysis is to identify mispriced stocks. This allows an investor to take advantage of the price discrepancy by buying the security when it is undervalued and selling it when it’s overvalued. In addition, fundamental analysis attempts to determine the intrinsic value, whereas technical analysis determines future movements based on past market data.
Although both types of analysis have their own advantages and disadvantages, stock market analysis by using past market data has become very popular with investors due to the convenience of using their computer, tablet or even smartphone to access information.
There are two types of stock market analysis: fundamental and technical. Fundamental analysis evaluates a company’s financial data, such as revenue and expenses, of determining the intrinsic value of a stock, while technical analysis involves examining past market data such as prices and volume.
Understanding fundamental and technical analysis is necessary for all investors as these two different methodologies offer different advantages and disadvantages.
With dedication and hard work, you can learn to do stock market analysis by yourself. Of course, you can also rely on specialists to do the work for you. However, whether you choose to do it yourself or not, understanding stock market analysis is important for every investor.