Types of Stock Market Analysis

Types of Analysis

Basically Stock Market Analysis by two main different methods and one supporting methods. The main two methods are work in different way. Both Method have different way of study a Stock. Investor or Traders has option to choose which method is suitable for his Strategy. The third method plays a very important role in the success of the main two methods.

There is no shortage of analysis for anyone interested in investing. A search for the term “stock market analysis” search result About 11,10,00,000 results (0.62 seconds) on Google and well over 63,60,000 results each on Bing, and Yahoo.

Three Types of Market Analysis

To begin, let's look at three ways on how you would analyze and develop ideas to trade the market. There are three basic types of market analysis:

1. Technical Analysis
2. Fundamental Analysis
3. Sentiment Analysis

There has always been a constant debate as to which analysis is better, but to tell you the truth, you need to know all three.

It's kind of like standing on a three-legged stool - if one of the legs is weak, the stool will break under your weight and you'll fall flat on your face. The same holds true in trading. If your analysis on any of the three types of trading is weak and you ignore it, there's a good chance that it will cause you to lose out on your trade!

Here’s a close look at each.

Fundamental Analysis

The goal of fundamental analysis is to determine whether a company’s future value is accurately reflected in its current stock price.

Fundamental analysis attempts to estimate the value of a particular stock based on a variety of factors, such as the current finances of the company and the prevailing economic environment. Fundamental analysis also may include speaking with a company’s management team and assessing how the company’s products are received in the marketplace.

When a fundamental review is complete, the analyst may decide the stock is an attractive opportunity because the market has underestimated its future prospects. The analyst also may determine the stock to be a “hold” or a “sell” if the value is fully reflected in the price.

Technical Analysis

Technical analysts evaluate recent trading movements and trends to attempt to determine what’s next for a company’s stock price. Generally, technical analysts pay less attention to the fundamentals underlying the stock price.
Technical analysts rely on stock charts to make their assessment of a company’s stock price. For example, technicians may look for a support level and resistance level when assessing a stock’s next move. A support level is a price level at which the stock might find support and below which it may not fall. In contrast, a resistance level is a price at which the stock might find pressure and above which it may not rise.

Sentimental Analysis

Sentimental analysis attempts to measure the market in terms of the attitudes of investors. Sentimental analysis starts from the assumption that the majority of investors are wrong. In other words, that the stock market has the potential to disappoint when “masses of investors” believe prices are headed in a particular direction.
Sentiment analysts are often referred to as contrarians who look to invest against the majority view of the market. For example, if the majority of professional market watchers expect a stock price to trend higher, sentiment analysts may look for prices to disappoint the majority and trend lower.
Which approach is best? There is no clear answer to that question. But it’s important to remember three things: Past performance does not guarantee future results, actual results will vary, and the best approach may be to create a portfolio based on your time horizon, risk tolerance, and goals.
Keep in mind that the return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost.