Thursday, April 30, 2009

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what is Fundamental anlaysis and Technical Analysis

I have been hearing a lot of sound bites from business media about "Fundamental Analysis" and "Technical Analysis".Its intriguing to discern it in laymans term for me so help me remember in future i write this blog and all those fellow amateurs this one

Fundamental Analysis

When a trader or a Broker takes a investing decision based on the company financials balance sheet etc and overall climate of socio economic conditions in surrounding area it is called a fundamental trade. For example a political coup in Pakistan or nationalization rumors in Venezuela or say bad profit for the quarter or say political stability in China or change in govt in India etc results in the trader to infer value of a company.
However these days these fundamentals are proving to be costlier to be relied on as the market is really volatile and any speculations could be potentially hitting a nail on your foot.

Technical Analysis

When trader or a broker takes the investing decision based on daily volume , and relies on mathematical analysis using regression techniques or predictive modelling, reversion of mean or technicals like standard deviation,variance, etc Charts which are available on is called as trade on technical analysis.

God knows how the markets are relying these days but for technical trading these days is automatic and computational financial engineering is used as long as the models work so is good once they stop it comes back to sentimental or emotional trading.

check out google: Quant funds to find out different type of mutual funds or hedge funds trading using quantitative analysis...

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