If you are investing then you are likely to be using one of three main ways of stock picking
. These methods include fundamental analysis, technical analysis and 'techno-fundamental' which is a combination of the two.
So what is fundamental analysis? Well if you are new to investing then it is likely to be the type of analysis that you have already heard of. Most people use this technique for their stock picking. This analysis is where you make an investment decision based upon some sort of value.
So how can you work out the health or the value of different companies? There are many different ways but they won't give you a definitive value, they will give you an idea and you can make your stock picking choice from this information. You need to look at some financial numbers. It isn't difficult to do but will take a bit of practice as there is a lot of jargon that is used.
There is a lot more to fundamental analysis and it is a great place to start. You also have technical analysis which is completely different. Technical analysis is more about how the market is reacting to the fundamentals. To do this you need to read charts and have a good understand of indicators like momentum.
Technical analysis is a more advanced form of stock picking and not everyone agrees with its principals but there have been some very good traders who have used it. They believe that all the known information is already in the price and therefore you only need to track the price.
Why not combine the two types of analysis for your stock picking? 'Techno-fundamental' is a great way of getting the best out of both. Own a good stock with high value but use technical analysis to time the market.