Share Market

Before one is capable of analyzing the stock market, one has to know what a stock is. It is a share of ownership of the company, into which the investor invests his money and there by gains some kind of profit, called as dividend depending on the percentage he invests. Now before investing the investor has to do a study of the sale, profit and capital investments in the market of the company. In other words they have to analyze the trading instrument. This evaluation of a particular trading instrument, an investment sector or the market as a whole is called stock analysis.

Stock analysts attempt to determine the future activity of the instrument, sector or market. There are two basic types of stock analysis: 1.fundamental analysis and 2.technical analysis. Fundamental analysis concentrates on data from sources like financial records, economic reports, company assets and market share. While technical analysis focuses on the past performance of the market and predicts the future price movement.

Fundamental Analysis:

Fundamental analysis of a business is its financial statement and health, its management and competitive advantage. This involves both its competitors and the market. It focuses on the overall state of economy, interest rates, production earnings and management. When analyzing stocks using fundamental analysis there are two basic approaches: bottom up analysis and top down analysis. The top down investors starts his analysis with global economy both international and national. The bottom up investor starts with specific businesses regardless of their industry or region. The top down investor therefore has to be well informed about the national economic indicators, GDP growth rates, inflation, interest and exchange rates, productivity and energy prices.

Technical Analysis:

Technical Analysis takes a completely different approach. It does not take into account the value of a company or commodity. It follows only the price movement in a market that is technicians /investors study the supply and demand in a market. In other words technical analysis studies the market itself.

Unlike fundamental analysts technical analysts only care about the securities past trading data and its movement in future. They believe that the stock prices discounts for everything, the present trend may follow into the future and that the history of a market trend may be repeated and therefore they refer to price charts.

For an investor the best is to invest, blending both type of analysis