What is the difference between technical and fundamental analysis?

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Overview
The process of evaluating businesses and projects to determine their performance and financial suitability is known as Financial Analysis. It is basically used to analyze whether an entity is stable, liquid, or profitable enough to sanction a monetary investment. There are two major types of financial analysis when approaching investment in the stock market: “Fundamental Analysis” and “Technical Analysis”.
Financial analysis, both Fundamental and basics of technical analysis, are crucial as they provide an idea to investors on investing their funds in a particular company. It is also helpful to government agencies in analyzing the taxes owed to the firm.
WHAT ARE THE IMPORTANT FEATURES OF TECHNICAL ANALYSIS AND FUNDAMENTAL ANALYSIS?

With fundamental analysis, an investor uses all the available data that affects a company economically, to gauge a share’s value. It can be qualitative (intangibles, like the quality of the company, brand value/recognition, management of the company) or quantitative (numbers like dividends, earnings, sales and book values of the company). This, on the whole, helps an investor know more about the financial health of a company.
In technical analysis, an investor assumes “it is all in the price”. The historical price data from the charts, act as a guide to the future. The charts by itself, as it is believed, offers a visual summary of what a stock has been doing. A few technical indicators are MA’s, Oscillators, Volume measures, etc.
Fundamental analysis assumes that share prices will reflect fundamentals in the long run. It tells an investor nothing about timing, and it is time-consuming as well.
Technical analysis, however, clues an investor into factors like sentiment or speculation, while also informing the right timing for an investment, unlike the fundamentals approach.

– While both types of analysis are used for researching and forecasting future trends in stock prices, both have their advocates and adversaries.
WHAT ARE THE MAJOR DIFFERENCES BETWEEN TECHNICAL ANALYSIS AND FUNDAMENTAL ANALYSIS?

Fundamental analysis uses ratios gathered from data within the financial statements, such as a company’s earnings per share (EPS) to determine the intrinsic value of a security or value of a business.
Technical analysis assumes a security’s value is already determined by its price, where the only inputs are the stock’s price and volume, while it focuses instead, on trends in value over time.
Technical analysis attempts to understand the market sentiment behind price trends by looking for patterns rather than analyzing a security’s fundamental attributes.
The fundamental analysis approach does not look at short term pricing and trading swings, hence this is considered a long term investment approach.
Technical analysis is considered far more of a short term methodology.
Fundamental analysis is all about investing in companies and relying on their underlying value to drive your returns.
Technical analysis is a trading strategy where you are aiming to drive returns out of identified trends and opportunities.
Earnings, expenses, assets, and liabilities are all important characteristics to fundamental analysts.
Technical analysts generally use only stock charts to identify patterns and trends that suggest what a stock will do in the future.
Day trading, swing trading, options trading is possible in Technical analysis.
Surveys show short-term, rather active traders and panic traders going for a technical approach over fundamental, while the markets move more on the fundamentals.

Summary
To conclude, one approach cannot be called better than the other. Both fundamental and technical analysis go hand-in-hand as one is said to be a reflection of the other. This is because if one has great charts, it automatically means great fundamentals as well, and vice-versa. It is just a matter of personal preferences and trading styles, and what one likes to look at while evaluating stocks and investments.

Relevant factors considered in Fundamental analysis include:
Revenues, expenses, and income
Growth prospects of the company
The competitive factors a company faces
Expected return on equity or assets in the industry
Relevant factors considered in Technical analysis include:
Historical pricing of the shares
Trading volumes over time
Industrial trading trends

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