Showing posts with label technical analysis. Show all posts
Showing posts with label technical analysis. Show all posts

Sunday, December 13, 2009

Fundamental Analysis of a Stock

Fundamental Analysis is the way of analysis of security based on their internal and actual performance of Company unlike Technical Analysis in which just the movement of prices is studied, without considering the fundamentals of the company

Fundamental analysis of a security is the study of Balance sheets, Profit or Loss account, assets and liabilities, sales income, other income, interest payment and etc.

Based on this an Analyst comes a conclusion about the future of the stock or the Company.

Some of the main value they see are PE ratio, EPS and Book value.

PE ratio is the ratio between Price of the Stock at the Market to the earning of the stock per share. Higher it is, the stock price is highly valued. If it is less, then the stock price is priced low.

EPS denotes Earnings per Share. It is the ratio of profits made for the year to the number of shares of the company. If the value is high, it means the earnings are high for the company and if it is low, then the earnings of the company is low.

Growing sales figure or slowing sales figure would influence the future performance of a company.

An analyst also see the performance of the sector at which a particular belongs to. They analyze the performance of the company with the sector’s performance. And also they see the future for the that sector.

Various factors like this influence the movement of the price of a particular stock. Study of this factors is Fundamental Analysis.

Saturday, December 12, 2009

Technical Analysis Introduction-2

In latter years , in the course of market history many analyst propounded their own theory, and new indicators are introduced .Many indicators based on momentum have become popular nowadays .

Japanese candlestick techniques are used along traditional western charting techniques.

The price of a security represents a agreement between a buyer and seller. It is the price at which the buyer decides to buy and the seller decides to sell.

If he expects the price to move up, he will buy it. If the investor expects the price to move down, then he will sell it.

Humans as a individual, are not easily predictable. But as a crowd their behavior is predictable. A individual as a member of a crowd would behave differently.

Because of the participation of people of various emotions, anticipation and expectation, the market movement is unpredictable. Because of this there is always a gap between demand and supply which makes the prices to swing constantly .

Technical analysis, in other words is the study of this demand and supply ,and anticipate price changes.

Technical Analysis Introduction-1

Technical Analysis is the art of analyzing a stock's historical prices in an effort to forecast the probable future prices. It is done by studying and comparing current price movement, with the help of tools like (i.e prices ,volume ,speed ,pattern and time) ,with the past price action to predict future course of the price action.

To put it simply, technical analysis is the study of prices, with price,pattern, volume and time as being the primary tool. it is applicable to stocks, commodities and currencies.

With the help of Technical Analysis we can predict the prices from days to several years . It can be applied at the time of both purchasing and selling.

Technical Analysis is useful for improving the investment decision making skill Before making investment decision technical analysis should be supplemented with fundamental analysis

Concepts and tools of technical analysis were developed several centuries ago. Japanese used candlestick trading techniques for rice trading in 16th century itself .

These tools are well tested since then and all over the world investors are using it successfully .

The traditional technical analysis method got a boost after the Dow Theory, developed by Charles Dow in 1900. So he is also called the father of modern technical analysis.

Since then many theories are propounded by many people based on Dow theory or based on price pattern (ie Elliott Wave Theory and Neowave ) or based on Momentum of the Market. be continued in Part 2.......