If you want to invest in stocks, you need to analyse them at first. You have to check whether a stock can give you desired return in a period of time or not.
Maximum people invest in stocks recommended by experts on telivision, magazines or newspapers and books loss in maximum cases they have to book loss.
There are two types of analysis of stocks based on the investment horizon-
Technical Analysis- The analysis which is done by the help of charts and different technical indicators is called technical analysis.
Benefits of technical analysis:
I. It reflects traders’ mood: The technical analysis is very much useful in trading whether it is day trading or it is short term trading. Different indicators like Relative Strength Index(RSI), MACD etc shows the mood of traders about a stock. Are they interested to put money in stock or not? Their interest shows that the stock price may rise. It creates an opportunity to trade the stock.
II. It helps to secure your money: Today a number of technical indicators are available to analyse a stock. If maximum indicators are indicating the price rise, then you put your money in the stock. But, if maximum indicators are reflecting price fall, you don’t put your money in the stock. Thus, your money is very much secure.
Fundamental Analysis- The analysis which is done by the help of performance of the company in the previous quarters and years is named as fundamental analysis.
To become an investor i.e. to invest for a long time you need this type of analysis. Before choosing a stock you have to go through the past performance of the company. If the company is
There are lots of books available in the market on both types of analysis. Start reading them today.
I’ll also write on both types of analysis in coming posts.