Not a lot of traders are asking themselves about fundamental analysis by mainly relaying on technical analysis. The logical question could be placed about how far a trader may rely on technical analysis without consulting fundamental approaches. Before answering on this question let us define a few main points about these both types of analysis. Fundamental Analysis assumes collecting a big volume of information about company which may include but not limited by earning reports, spending reports, development reports, company's goal, company's plans and others. This type of analysis requires gathering information about the industry in which the company operates, what is prospective of this industry and how the company goes along with industry. As you may imagine this could be a lot of information it could be time consuming to process all this info for a purpose of generating a trading decision - buy or not to buy stocks of the company. On the other hand we have technical analysis. Easy to learn, easy to use computerized tools. Technical analysis is based on the analysis of past performance of the stock and applying it to the current situation in order to predict possible future trend. This type of analysis mainly includes analysis of the volume and price charts. Majority of traders stuck with this type of analysis because it is easier to use and this analysis is less time consuming. The answer on the question what type of analysis to use is very simple. If a trader looking forward to make 2-5 trades a day (intraday trader) he/she should not bother by fundamental analysis at all. As a rule intraday traders do not care what is going to happen to the company over the month and if this company is going to exist in a year at all. All they are interesting in is where the price of the company's shares going to be in 5-20 minutes. These traders could rely only on technical analysis and this is what they use. The same could be applied to those traders who intend to make 1-2 trades a week and even 2-3 trades a month. Yet, when it goes to the mid-term traders who plan to have only 2-3 trades a years, it becomes essential to consult fundamental analysis. If you are going to hold company's shares for more than 6 months, you need to know a little bit about this company at least. You still may use elements of technical analysis, however, it is recommended to do some company research as well. When it comes to the long-term players - traders who plans to hold company's shares for several years - technical analysis become less useful and more attention are drugged to the fundamental analysis. This is logical, if you buy something for such big term you have to be sure it is not broken when you are willing to sell it and has at least the same value so you do not loose. Article Source: http://www.eArticlesOnline.com About the Author: Get technical studies, stock charts and quotes, including advance decline data to trade QQQQ, SPY, DIA and other index derivatives by using index technical analysis. Keywords: technical analysis, fundamental analysis, stock, chart, trading
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