TECHNICAL ANALYSIS AND FUNDAMENTAL ANALYSIS

  What is fundamental analysis and what is technical analysis and how we can use them in our trades to get better entry points Before we understand what these things really are I want you to have a clear understanding that trading is not gambling. Gambling means it's a 50/50 probability or even lesser to get a successful outcome trading is not gambling .

Trading is all about finding high probability setups in which you can use different tools like I said before fundamental analysis and technical analysis. So before you invest into a particular stock or before you trade on a particular stock it is very important for you to have a point of view for a particular stock. By point of view I mean that you need to have done proper research on it and you need to have a good understanding with the facts to why this particular stock is good to investor trade on. To do this we use the fundamental and technical analysis. 

So what is technical analysis? To start off with technical analysis gives you the structure of a particular stock. The structure as in you can find the best entry points as well as define what are the possible target prices? what is the possible stop-loss for this what is the risk that is involved in spotting a trade etc  All of these things can be analyzed through technical analysis. TA or technical analysis is where a participant scans for opportunities in the market depending upon the current trend. Now these trends are actually formed by different market participants who are also trading on the market. The actions taken by these market participants usually form patterns on the chart which can be used as a reference for doing technical analysis. Many people often consider TA as a quick and easy way to get money. They think that's a get-rich-quick scheme but it's not. It's a get rich slow scheme.

 TA is all about practicing and practicing. It's a skill like any other in which you start as is no way so beginner and then you will keep learning learning from your mistakes and that's how we grew as a technical analyst. TA is just like a skill that you have to develop just like a surgeon takes five years to actually become a proper surgeon and you know be good at what he does. Stock market analysis also takes its time being a technical analyst, you will get this later on in your life but in the initial days you have to put in your time and in effort and we practice a lot to actually understand the charts easily. So you will get to a point in which even by just looking at the chart like even if you just glance at the chart for one instance you'll understand the different patterns that being formed and you'll understand the possible trade place that you can take. So just invest your time into it and it's gonna be worth it.

 TA is mainly used for finding short-term trades whereas for long-term investments the long term trades usually use fundamental analysis. But if you wish to get the right price point or get a better price point for along-term investments that's where we combine both TA as well as FA. FA being Fundamental Analysis, so when you combine TA, that is technical analysis with FA you can get better price points and this is why TA actually defines your trades. The greatest advantage of using TA is that it can be applied across all asset classes may it be equity, commodity, futures and options, Forex, crypto currency whatever it is and not just an Indian market .It's applicable in any market throughout the world but now let me give you a brief introduction on the various techniques that are actually used in technical analysis.

 Number one is Candlestick patterns. Patterns are formed usually on a Japanese candlestick chart by identifying these patterns you can actually understand various price movements and take your trades based on that. The second one is support and resistance this is probably the most important concept of technical analysis, because this forms the fundamentals for a lot of other things. So in this particular technique you can identify the buyer zones and the seller zones. So all the buyers usually enter a particular trade at the support and all the sellers usually enter a trade at a particular resistance. Now this is just the very basic topic about it. There's much more to it but you will get to that later on. The third one is volume. Volume indicates the number of shares that are being bought and sold over a period of time. It plays a really crucial role in TA and it gives you an understanding about what the other traders in the market are doing .

Next up is technical indicators, these are basically mathematical functions that are coded into the charts already these technical indicators gives you a perspective about what the charts are likely to do, but these rely on past data and is not a hard coded data. Indicator should be use das a confirmation for your trade like you focus your trades based on price action and then as a confirmation for your particular trade you can use indicators. Do not trade solely based on indicators because the success rate for that it's quite low. There many technical indicators which are used worldwide, some of the most popular ones are number one is MACD, which is moving average Convergence Divergence. The second one is Relative Strength Index that is RSI. The third one is Bollinger Bands Bollinger Bands gives your idea about the volatility of a particular stock. The fourth one would be VWAP which is Volume Weighted Average Price. Then there is super trend, there is Moving Average Crossover, there are so many different indicators out there as I said before do not try to trade only based on indicators, try to combine this with along with Price Action and other Technical Analysis tools which will give you a much higher probability of a winning setup. Now coming back to Technical Analysis again we have a lot of other different things to be used as well which is like Fibonacci retracements, Dow Theory, Price action etc etc 

Now let's get to fundamental analysis. Say if there's someone who wants to invest into a perilla company looking for returns say for five to six years from now. They wouldn't be comfortable investing just like that. They have to do their research about it. To do their research the Fundamental Analysis is what they have to do. So this particular investor has to focus on the foundations of the company. So a fundamentally strong company will create wealth for its investors overtime. So basically it's a technique which gives you assurance to invest in a company by identifying the well creating attributes of that particular company. So anyone can be a fundamental analyst all they have to understand is just the basics of the financial statements, understand the business from the industry point of view and as well as some basic mathematical calculations like addition subtraction division That's pretty much it. So the tools required for doing a Fundamental Analysis is our number one is your Annual Report of the company, the second one would be your industry related data. Third is daily business news and fourth, Microsoft Excel. That's all you need to become a successful fundamental analyst So in a nutshell using TA it can define your trades you can identify different entry points and exit points by using technical analysis whereas in FA you can identify stocks of companies which are fundamentally strong, so which will create wealth for you over a long period of time. So if you combine both of them together you can find the best entry points for investing as well as trading.