subject: Two Ways You Can Approach The Stock Market [print this page] If you have just started learning about the stock market then you will find that there are really two different ways to approach it.
1.Fundamental Analysis
When it comes to most stock market most people focus around fundamental analysis. That is because the common wisdom is if a company is fundamentally strong then sooner or later it's stock will follow.
And over the long term that does seem to be the case. So most fundamental investors will look for fundamentally strong stocks and buy and hold those stocks for the long term. And if the company offers dividend paying stocks then so much the better.
2.Technical Analysis
One other school of thought when it comes to stock market investing is technical analysis. While it might be very nice to sit back and think that all of the short term ups and downs that happen in the stock market can be explained by how the company made or lost money it really can't.
Actually over the short term stocks are more influenced by supply and demand. If more people buy a stock then sell it then the price of that stock will go up. On the other hand if more people sell a stock then buy it then it will go down. Because people are predictable we tend to make certain patterns in the stocks that we are trading, by learning these patterns and trading off of them an trader can make money from stocks.
So, what way should you focus on? Well that really depends on how you see the market and what your goals are.
But there is one common denominator. They are on opposite sides of the spectrum. Technical analysis works better then fundamental analysis when it comes to short 1 day to 1 month moves. Fundamental analysis works better when it comes to longer moves that last years. So if you want to trade stocks over the short term take a look at technical analysis.
However if your goal is to find solid companies to invest into over the long term then fundamental analysis is normally the way to go about it.
