Analysis; different lenses

Analysis; Same object different lens

Different Types Of Analysis

There is no doubt in my mind that you have heard the following two terms in your quest for knowledge. Fundamental and Technical analysis are two sides of the same coin so to speak. They both allow you to look at the same object from different angles.

Three Methods of Analysis

FUNDAMENTAL Analysis

This refers to looking at the data that gives the assets it’s “Value”. For example the value of stocks; which are shares of companies is derived mainly by two things. How much profit it makes and how much cash it has.

Technical analysis

This method of analysis mainly focuses on price changes in a given time-frame. In this method traders will look at price charts and make trading decisions based on patterns they recognise.

Technical Analysis Example

In this chart a trader may choose to take a long trade at the point where the arrow is. The decision to do so is because of the probability price action will act like it did previously.

Sentiment Analysis

Sentiment analysis is where traders look at what other traders are doing to gauge the market sentiment. The trader will look at what actions retail, institutional and commercial traders are taking. The trader wants to know are majority of them selling or buying. Insight into the market sentiment can help a trader decide to go long or short.

If the the market sentiment is in favour of buying the asset then traders may go long, and vise versa.

Learn more: Candlestick Charting 

 

 

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Bob Bain

Bob Bain is the creator of Investo-Blog and has been trading as an independent trader for over 10 years. Bob's passion is to help people understand the simple principles behind investing and trading successfully.

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