PostHeaderIcon Combining Technical and Fundamental Analysis

Although many experts see a contrast between technical and fundamental analysis in terms of being a trading strategy, there are certain situations that they can be both be used. There are some elements that both strategies use that traders and stock market investors can make the best use of to further improve and enhance the decision making process pertaining to particular stock deals.

Here are some of instances where the combination of fundamental and technical analysis methods may help investors in making important financial decisions.

Volume Indicator of Trends

When doing some research on a particular stock, experienced stock investors also try to know what other investors think about it. Investors try to check out the market sentiment on a particular stock to see if the market and the investor are thinking along similar lines. And one way that an investor may be able to gauge market sentiment is by looking at a stocks, recent trading volume.

A large increase of a particular stock’s traded volume in the market may show that it has garnered considerable attention from other investors as well. Volume trends is one of the elements that is used in technical analysis to look for stocks worth buying or selling. This can be used by fundamental investors to further check out a particular stock if it is a good buy long term.

Tracking Patterns

Fundamental analysts and investors can take a look at stock charts to see how it performs over the years with the release of certain types of news. How the certain stock reacts to news in terms of price and volume changes are likely to be repeated in the future. This can be considered as a pattern. These patterns tend to repeat themselves when certain news reports of the similar manner are released. The investors tend to react in a similar way over time. By trying to analyze such patterns in the charts, investors may be able to gauge possible reactions in the future.

Tracking Short-Term Stock Changes

Although investors relying on fundamental analysis focus on the long term, they might want to look at favorable timing when it comes to buying or selling stocks. This is where technical analysis and the charts may be of help by checking out the moving averages. A moving average is an indicator used in technical analysis that shows the average value of a stock over a set period of time.

It is usually used to determine a stock’s momentum and smooth out price and volume changes over the period that may confuse interpretation. Moving averages of a stock usually continues on that trend for a short period of time. Tracking it can help investors somehow determine what to expect on the coming term.


Leave a Reply