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Combining Technical Analysis With Fundamental Analysis
Shaun Rosenberg
http://www.stocks-simplified.com
Technical Analysis and fundamental analysis are two different ways to look at the stock market. Each of them has proven to be helpful. And while every trader will favor one or the other you can gain a lot by combining the two.
Let's look at why technical analysis is important first. It is the study of chart patterns and trends. This study plays off of the emotions and is extremely helpful in the short term. That makes it good for earning an income or using compound interest at a fast rate.
Now why is fundamental Analysis important? It talks about the company as a whole. This provides us with an idea of what we are actually buying. It is important to be bullish only on strong companies and bearish on weak companies.
Why combine the two? I have often believed is that fundamental analysis is what should happen and technical analysis is what does happen. But there is something to say about what should happen. There are a few reasons why combining the two works best.
The fundamentals let us know how strong a company actually is. We do not want to buy a stock based purely on technicals and watch the company declare bankruptcy. The fundamentals also provide a decent buying pressure when the company is strong and selling pressure when the company is weak anything that can help.
Technical's provide us with the exact entry and exit levels that can make the trade work. Because it deals with patterns that worked in the past it can give us a good clue to when the next jump or next crash will occur. In addition because there are technical traders out there chart patterns will also give us buying or selling pressure depending on the pattern.
It is important to combine technical analysis and fundamental analysis to put all of the odds in our favor. The more things that work for us the better chance we have of making a profitable trade.
For more information on technical analysis visit http://www.stocks-simplified.com/ technical_analysis.html
For more information on fundamental analysis visit http://www.stocks-simplified.com/fundamental_analysis.html
Article submitted Sunday, September 07, 2008
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