What are the basics of stock market analysis?
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Stock analysis basics can be broken into two broad categories: fundamental and technical.
Fundamental analysis refers to the study of the company’s annual report, financial ratios, quarterly performance, assets, liabilities, and so on. Analysts and investors look into the financial performance of a company to estimate how it may perform in the future and whether the company is being fairly valued by investors currently. Usually, financial analysis is used to make case for long term investments as any mispricing between a company’s market value and its intrinsic value may take time to be fully understood and for the stock price to adjust
On the other hand, technical analysis involves examining prices and volumes to determine future performance. Technical analysis assumes that all information in the market is factored into the price. It also assumes that the stock prices follow an established trend and patterns seen in the past. It is generally used by short term traders.