Fundamental Analysis

As opposed to technical analysis, fundamental analysis does not involve the study of charts, price patterns, or technical indicators.

Fundamental analysis tries to discover what "should" happen to the price of a stock, currency, future, etc. by studying financial conditions, economics, political environments, etc. Technical analysis, on the other hand, assumes that all these factors are already reflected in the chart of the financial instrument in question, so a study of the chart suffices.

Fundamental analysis is a lot more difficult to perform than technical analysis and involves knowledge of economics, politics, accounting, etc.

Although there are eternal arguments as to which method of analysis (technical or fundamental) should be used to make a buy or sell decision, both methods are useful. In general, fundamental analysis is better for longer-term investing by helping the investor better determine an investment's possible "intrinsic" or "real" value, while technical analysis can be better used for day trading and short-term trading. Despite this fact, many investors and traders use a combination of both methods in implementing their financial strategies.

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