Types of Analysis In The Stock Market
Introduction:
A stock market is a place where the investors buying and selling the shares of publicly traded companies. Stock markets (also called equity markets, share markets, or stock exchanges) are networks of buyers and sellers of stocks (also known as shares), which represent ownership claims on business entities, they may include securities listed on public stock exchanges and securities that are only traded on private exchanges. The stock market has three types of analysis Fundamental Analysis, Technical Analysis, and Sentimental Analysis.
Types of Analysis in the Stock Market
- Fundamental Analysis
- Technical Analysis
- Sentimental Analysis
Fundamental Analysis
Using fundamental analysis, investors are given a wide view of a company's financial strength and its potential for future growth, allowing them to decide whether it offers a good investment opportunity based on its true worth. However, in the stock market, the fundamental analysis method is always a failure.
Why does fundamental analysis fail in the stock market?
The fundamental analysis is always a failure because the fundamental analysis is based on Hard News, Soft News, and Rumors. It has the possibility of market movement up to 80% through the fundamental analysis but we can analyze the market up to 20% because it will be fully based on News.
What is meant by Hard news?
Death of a leader, COVID-19, and war are referred to as the hard news in the stock market. Theses news affects the market at unexpected times and in that time the market will break the trend.
What is meant by Soft news?
Economic News, Elections, and Quarterly Earnings are referred to as the soft news in that time the market is in the stages of Normal Demand and Supply.
What is meant by Rumors?
High Volatile, False News, and Fake Company New Projects are called Rumors in that time the market will react to an unpredictable trend.
Sentimental Analysis
Sentimental analysis involves the overall attitude or mood of investors and market participants toward a particular stock or sector.
Why does sentimental analysis fail in the stock market?
In the sentimental analysis, there are two types of traders Gamblers and
Speculators. It has the possibility of market movement up to 20% through the fundamental analysis but we can analyze the market up to 20% because it will be fully based on emotions and sentiments.
What is meant by Gamblers?
Gamblers trade based on their emotions or must-win attitude, they do not take entry with proper analysis of the market. When the market goes up they buy the stocks, when the market goes down they sell the stocks. It makes a first-time profit but finally, they lose their whole amount.
What is meant by Speculators?
Speculators make investment assets for short periods and utilize techniques to profit from changes in the price of those assets. The majority of speculators trade without proper analysis and money management techniques. They also make invalid entries and exits in the market.
Technical Analysis
The purpose of technical analysis is to predict the short-term to medium-term price movement based on historical price and volume data. It is primarily used by traders, day traders, and swing traders as well as risk managers. Technical analysis focuses on stop-loss orders and risk management techniques. Prices and volume are the primary data sources for technical analysis. However, the technical analysis works 80% in the market.
Why does technical analysis work 80% in the stock market?
The technical analysis is fully based on Chart Analysis, Price Action, and Candlestick Patterns. It has the possibility of market movement up to 60% through technical analysis but we can analyze the market up to 80% with the above analyzing tools.
What is meant by Chart Analysis?
Investors and traders use chart analysis to analyze financial markets by analyzing historic price and volume data. It is also known as technical analysis. It involves determining patterns, Trend continuation and transformation, and Support and resistance.
What is meant by Price Action?
An important part of technical analysis is price action, which involves plotting price increases and decreases over time to identify patterns and trends.
What is meant by Candlestick Pattern?
Candlestick patterns are a technical analysis tool used by traders to predict stock market price movements. They are based on historical price patterns and are displayed on candlestick charts that show daily price movements.
Conclusion
In conclusion, the technical analysis method is the best strategy for making consistent profits in the stock market. Most of the successful traders are using this method to keep their accounts consistently profitable.