About Stock Market

Every country has an economy and every economy consist of a stock market. The stock market is just like the heart of the economy. The stock market is an indicator of economic change because it shows consumer confidence and buying trends. A stock market is a market in which shares of stock are bought and sold. Today the investor's job is to search for potential public listed companies to invest their money into it in a hope of making returns in the future. But however for a investor to decide which company to buy/sell they will first need to do some homework. Fundamental Analysis and Technical Analysis are 2 analysis that an individual investor need to perform in order to make a buy/sell decision.

What is Fundamental Analysis?

Evaluation of a company's stock based on an examination of the firm's financial statements. It is distinguished from technical analysis , which attempts to predict the market price of a company's stock based on historical price performance and overall stock market trends. It considers overall financial health, economic and political conditions, industry factors, marketing aspects, management quality, and future outlook of the company. The analysis attempts to ascertain whether stock is overpriced, underpriced, or priced in proportion to its market value. Fundamental analysis provides much of the data needed to forecast earnings and dividends. Fundamental analysis tools include HORIZONTAL ANALYSIS, VERTICAL ANALYSIS, and ratio analysis , which give a relative measure of the operating performance and financial condition of the company. The following figure summarizes various factors that will go into your investment decision-making process, ranging from economics and the external environment surrounding the investment vehicle to the company's performance measures.

What is Technical Analysis?

Forecasting price movements by analysis of trading volume, supply and demand, short-term and long-term market trends, and other market related factors. An important premise in technical analysis is that certain price-volume factors repeat themselves, and can be illustrated graphically by chart patterns, a process known as charting. For example, a point and figure chart, showing the upward and downward movement of a security in a given time period; an ascending top, showing continually rising prices and the beginning of a price rally; a head and shoulders pattern, depicting the reversal of a trend; and a double top, signaling the end of a rally. First used by commodities traders, charting is a frequently used analytical tool in the stock market, foreign exchange, and financial futures. Technical analysis differs from fundamental analysis, which examines financial information, such as company earnings and capital formation, and is concerned foremost with the financial strength and profitability of an issuer of securities.

Technical analysts believe that, by diagramming the movement of a market, they can determine market swings in advance. According to the theory, the best time to sell (take a short position) is the start of a major downtrend; the best time to buy is when prices, and trends, are heading upward. The drawback with this methodology is that chart patterns often are recognized only after the fact, that is, after events have run their course. In most situations, the presumed bargains represented by trading patterns are temporary opportunities and usually disappear once large numbers of people have acted.