Wednesday, June 17, 2009

Fundamental vs. Technical

Basically, fundamental analysis involves looking at a particular company, while technical analysis only looks at the company's stock price, or the stock market overall. While a fundamental analyst looks at financial statements to see if XYZ is selling products, making a profit, increasing shareholder equity, etc., a technical analyst couldn't care less about the company itself. A technical analyst just wants to see where XYZ's stock has been trading and figure out where it's headed next by looking at volume, charts, moving averages, etc. A fundamental analyst doesn't try to determine what a company's stock is going to do over the short-term. Instead, a fundamental analyst tries to buy an ownership stake in a great company that should grow in value over time. Price-to-earnings, price-to-book, dividend payout ratios, profit margins, etc. are concerns of the fundamental analyst. Support, resistance, breakouts, volume, and moving averages are concerns of the technical analyst. If he studies data on a company's financials, he's a fundamental analyst. If he studies market data on the company's stock price, he's a technical analyst.
Which one is more likely to lead to profits?
That's way beyond the scope of the exam, assuming anyone could answer the question in the first place. But I kind of like the results that Warren Buffett and Charlie Munger, Peter Lynch, and the "Motley Fools" have shown with fundamental analysis. A successful technical analyst? He'd probably be glad to sell you a once-in-a-lifetime-educational-opportunity that will show you how to earn millions trading the stock market for just $3,999.99.


  1. Mr. Walker,

    I used you "Pass the 65" guide and passed the 65 last month. It was very useful.

    Just wanted to say thanks.


  2. Nice job, Jason! ?There is nothing easy about the Series 65.