by Ismael Frederick | April 25, 2017 6:29 am
Broadly, stock trading strategies can be divided into those bought after a technical analysis of the stock and those purchased as the result of a fundamental analysis. So what’s the difference?
Fundamental analysis is usually based on analysis of historical and present data, with the aim of trying to determine both current and future value of the stock. Assessments of stocks using this means are a favorite of investors like Warren Buffett; and are often used to determine whether the actual or ‘intrinsic’ value of a company is currently undervalued or fairly-valued or over-valued.
As an example, looking at a chart, you may determine that dow jones stocks were somewhat overvalued prior to 2014, but were on sale during much of 2015.
Technical analysis, on the other hand, looks at the future direction of stock prices through the study of past market data, especially pricing and volume. While there are many schools of thought, the general goal is to determine the direction and strength of a future stock price by looking for patterns in the stock price movements.
A quick look at the chart shows in 2014 a double top pattern, where the index twice reached a high of above 18000, and to technicians as a bearish signal in the market.
Over the past twelve years, I’ve had some wonderful successes and abysmal failures in stock trading, all of which I will be happy to share with readers of my articles!
In time I learned from my many mistakes and became a better at stock trading. I also discovered other reasons why stock trading is such a great investment vehicle.
The Stock Market Reaches Into Everyone’s Lives
Though there is risk in stock trading, “Yes, I do love the risk,” there are a few other things that I enjoy about trading as well, such as how the stock market seems to impact everything in our daily lives; and how everything in our daily lives seems to have an impact on the stock market.
Think about it…
…every day you spend money. Everyone spends money differently than the next person. And everyone spends it on different things. The one thing that unites our spending is…
…you guessed it, the stock market. So, next time you pull into a gas station or are at the check out line at the grocery store, think to yourself how your purchase will affect the stock market and how the stock market affects the product or service that you will be purchasing.
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