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Analysis

Analysis refers to breaking a complex topic into smaller parts to better understand it. There are two main types of analysis used in business and finance: fundamental analysis and technical analysis. Fundamental analysis examines external and internal factors that may affect a security's value, such as economic conditions and financial statements. Technical analysis focuses only on historical price and volume data to identify trends and predict future movements. While fundamental analysis is more appropriate for long-term investing, technical analysis can help traders time short-term trades. Both types of analysis provide useful information, so combining the two approaches can create an effective analysis strategy.

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Rafiur Rahman
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49 views

Analysis

Analysis refers to breaking a complex topic into smaller parts to better understand it. There are two main types of analysis used in business and finance: fundamental analysis and technical analysis. Fundamental analysis examines external and internal factors that may affect a security's value, such as economic conditions and financial statements. Technical analysis focuses only on historical price and volume data to identify trends and predict future movements. While fundamental analysis is more appropriate for long-term investing, technical analysis can help traders time short-term trades. Both types of analysis provide useful information, so combining the two approaches can create an effective analysis strategy.

Uploaded by

Rafiur Rahman
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Analysis: Definition: It refers to the process of gaining a comparatively better way to understand any complex topic.

It refers to the process of breaking substance into smaller parts to get more clear idea about the topic. Application: Process of analysis is applied in almost all sphere of our life to understand things more clearly. In Business, analysis is required in knowing the following sectors well.

Financial statement analysis the analysis of the accounts and the economic prospects of a firm Fundamental analysis a stock valuation method that uses financial analysis Technical analysis the study of price action in securities markets in order to forecast future prices Business analysis involves identifying the needs and determining the solutions to business problems Price analysis involves the breakdown of a price to a unit figure Market analysis consists of suppliers and customers, and price is determined by the interaction of supply and demand

Types of analysis: There are basically two schools of thought when we talk about market analysis. The process of analyzing things is classified into two classes1. Fundamental Analysis 2. Technical Analysis These two analyzing processes are used for Researching and forecasting the future growth trends of stocks. Understanding the financial condition of firms Analyzing price action, Forex (Foreign Exchange) traders, etc.

But fundamental and technical analysis is on completely opposite sides of the spectrum. 1. Fundamental Analysis: Definition: It attempts to study everything that can affect the security's value, including macroeconomic factors (like the overall economy and industry conditions) and company-specific factors (like financial condition and management).

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Application of Fundamental Analysis in the sphere of financial markets and economy: It uses information about the global and national economies, and the financial state of the companies involved, as well as non financial information such as current political and weather information. It believes that the markets will react to events in certain ways and that they can predict future market prices based on these events. It has probably been in use since there were markets to trade, and has traditionally been done manually, but as computing power increases it has become possible for some fundamental information to be processed automatically. Application of Fundamental Analysis in stock analysis: It is the process of analyzing company financial statements, products, management, competitors, markets and economic environment to determine the value of its stock. Pattern of data used in analysis: Both historical and present data can be used, with the goal being to forecast how the financial market, economy or stock will perform in the future. 2. Technical Analysis: Definition: It is the study of the share price rather than the company, the use of historic price and volume data to determine trends, entries and exits, predicting the future from the past. It has a belief that all of the information about a market is already included in the price movement, so they do not need any other fundamental information (such as earnings reports). Application of Technical Analysis in stock analysis: This analysis looks at the history of a stock's trading pattern rather than external drivers such as economic, fundamental and news events. Pattern of data used in analysis: It employs models and trading rules based on price and volume transformations, such as the relative strength index, moving averages, regressions, inter-market and intra-market price correlations, business cycles, stock market cycles or, classically, through recognition of chart patterns. It is very often used by active day traders, market makers and pit traders. Difference between the two: Fundamental Analysis It is more likely to be used by investors. It involves research into those causes which will indicate future strength or Technical Analysis It is the province of traders. It deals with market action without much concern for the underlying causes Page 2 of 3

weakness. It may be great for the long term but would not be a good basis for trading. It reveals just too much information The findings may be hard-pressed to apply their experience to different fields It provides the trader with the actual value of the investment. The timing is inherent in technical analysis. It shows where to make their short-term profits If once learned, it can be applied across different markets and different types of securities It is used as a combination of mathematical formulas and chart analysis to predict which direction the share price is most likely to move in

Conclusion: It is a good idea to combine both fundamental analysis and technical analysis in stock market investment. In short, this strategy is using fundamental analysis to find a good company first, and then, using technical analysis to predict the market price trend. Finding the balance is the key for anyone, it is comfortable to incorporate fundamental and technical analysis into a system that attempts to capture the best of both worlds. As economic forces ultimately control the direction of a market, the first step is to determine what those forces are and how they will affect the longerterm direction of the market. Thus, using fundamental analysis to gives a long-term perspective on the market, and will focus the majority of the trade recommendations in that direction. Technical analysis is used for timing of the trades for entry and exit, and how aggressive one wants to be with that particular trade.

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