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I'm not sure if you're asking about fundamental analysis or investment fundamentals in general? In a nutshell: - Technical analysis are technical indicators o
by Keyframe 13y ago
I'm not sure if you're asking about fundamental analysis or investment fundamentals in general?
In a nutshell:
- Technical analysis are technical indicators over price, such as charts and overlays over those prices which would in theory provide you with an insight where price will go based on past performance/situations by only looking at the price action. Namely, charts and patterns as well as trends is all you need. Though there is more. Whether you 'believe' in it or not, turns out it's a self-fulfilling prophecy because lots of people 'believe' in it, so it's a good mechanism to rely on in general.
- Fundamental analysis is where talk, politics and outside factors (earthquakes, scandals, stuff) influence price action. Some people monitor news and trade based on that, some do it only by TA (technical analysis), smart ones use both.
- Risk management is how you calculate how much you will trade, how much you will take out once your trade goal is reached, or how much you will lose if your position is losing - and where you will take the loss. In my opinion this is the most important part of investing in anything. Good rule in trading is to make positions in such a way that they allow you at least 2:1 ratio of profit. Meaning that for each win you'd have to incur two losses to wipe that win out.
Those three things are the pillars of investment fundamentals. In my opinion, good defensive risk management strategy is over half the battle, if not more.
- NhanH 13y agoIsn't the efficient-market hypothesis dispute the effectiveness of both fundamental analysis and technical analysis?
- Keyframe 13y agoMaybe, but that's in the realm of philosophy though. People use metrics and it's certainly debatable if it works or not.
- lifeisstillgood 13y agothank you - really interesting and pretty much what I was looking for cheers