The purpose of the Fundamental analysis is completely different from the purpose of Technical analysis. Fundamental analysis is done to find the right value of the company whereas Technical analysis is done to predict the future price movement of the stock.
Secondly, when we discuss fundamental analysis the comparison is between various companies in the same sector. Along with the study of economic, political, competitive & industry. With this, we can conclude which the right company to buy.
Technical analysis on the other hand studies same stock price movement historically. Based on the historical price movement of the stock study on human psychology along with price movement pattern is studied to conclude when is the right time to buy the stock.
You would be surprised if you study fundamental and technical analysis on a stock like Tesla.
Last five years the Tesla stock has been making a loss but the chart shows that this is not deterring the existing and new investors from the stock.
If you were sitting in the year 2012-2013 when the stock price was just 20$ and making losses, fundamentalist would have concluded that this is a loss-making company and would not have entered the script.
At the same time, the stock during that time would be making a higher top and higher bottom only to conclude by a technical analyst as a must buy.
Understanding the difference between the Technical analysis and Fundamental analysis is very crucial.
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The stock screener is very useful for choosing the best stock based on the comparative financial analysis. Remember fundamental stock analysis is only as good as you are.
This answer to our one question which stock to invest in. Based on the financial criteria you are looking or targetting the fundamental stock screener would bring out the best possible stocks from the lot. These stock screener act as a solver based on all the parameters given to the tool.
Technical analysis, on the other hand, would do the number crunching based on the past price movements of the stock based on averages, candlestick, pattern, and breakouts.
This answers to our one question when to invest in the stock. History of technical analysis with a study of lakhs of stocks over has concluded various concepts which are pertaining to patterns, breakouts, volumes, candlestick, and averages how the stock is going to behave post certain events.
Complimentary & Supplementary to Each Other
Independently each has its own disadvantages over the other. It is important to understand the disadvantages and use the tool accordingly.
You must be wondering in the case of Tesla when Technical analysis gave a green signal fundamental analysis did not show positive signs. It is simply which you give more importance technical analysis over fundamental analysis. And in the fundamental analysis which section you give more important or higher weight. Also in fundamental analysis profitability is just a part of the entire analysis process.
The investors those who have invested in Tesla are more likely to purchase the stock for its growth perspective than profitability.
Most of the time investors and traders would like to use one of the tools independently.
Why should you use any of your analysis independently when you can get a confirmation from the other analysis.
The probability of success is very high when positive signals are given from technical analysis and fundamental analysis. The depth of technical analysis is much more than what is commonly understood.
People often have more faith in Fundamental analysis over technical analysis.
Independently each strategy has to be applied differently since their probabilities of success is different.
The most likely conclusion would be to use both the analysis together in decision making. But there more stalwart investors who have attained more success through fundamental analysis independently than technical analysis independently. Vice versa is never true. The fundamental analysis provides better and larger rewards than technical analysis.
Certain opportunities which can bypass fundamental analysis at times is caught in the net by technical analysis.
At the end, it more important what investor is more comfortable with and how he uses the same.