Technical Analysis vs Fundamental Analysis
Forecasting prices from charts, trends, and trading volume. Valuing a company from its financial statements, management, and industry.
What is the difference between Technical Analysis and Fundamental Analysis?
Technical asks when to buy (price patterns). Fundamental asks what to buy (business value).
| Technical Analysis | Fundamental Analysis | |
|---|---|---|
| In one line | Forecasting prices from charts, trends, and trading volume. | Valuing a company from its financial statements, management, and industry. |
| Example | A stock repeatedly bouncing off $50 is said to have support there. | Comparing a retailer's P/E, debt-to-equity, and sales growth against its competitors. |
| Unit | Equities, Funds & Alternatives | Equities, Funds & Alternatives |
| Series 65 | Section 2: Investment Vehicles | Section 2: Investment Vehicles |
What is Technical Analysis?
Technicians study price and volume history - trends, support and resistance, moving averages, market breadth - rather than business fundamentals. The efficient market hypothesis in its weak form says this cannot consistently work, since past prices are already reflected.
What is Fundamental Analysis?
Analyzes earnings, cash flow, balance sheet strength, competitive position, management, and the economic backdrop to estimate intrinsic value. Top-down starts with the economy and narrows to sectors and companies; bottom-up starts with the company.