“Fundamental analysis seeks to establish how underlying values are reflected in stock prices, whereas the theory of reflexivity shows how stock prices can influence underlying values.”
Most investors depend on financial information to judge companies and financial instruments. Fundamental analysis is the method of choice because it provides dependable, consistent information.
Fundamental analysis more than anything else, provides a means for comparison. We can make judgments only by comparing one thing to another.
But why perform analysis at all? Why not simply choose stocks by throwing the darts at the stock listing? Some people make an arguments that random selection walk theory, for example, says stock price change in a random and unpredictable manner and that the effect of new information’s on market prices cannot be predicted with any degree of certainty. Anyone who seriously approaches investing has to question the wisdom of the random walk theory. It just makes sense that studying fundamentals, intrinsic information about a company leads to an intelligent stock selection, while the failure to perform research may result in bad choices- a loss of money. Most people agree that doing research is better than not doing research.
A second theory which we apply is the efficient market theory, which states that the current price of a stock reflects all known information about the company. The theory also states that as new information becomes known, it is factored into the stock’s price immediately.
In finance, technical analysis is a security or commodity analysis discipline for forecasting the direction of prices through the study of past market data, primarily price and volume.
Technical analysis derives from the observation of financial markets over hundreds of years. The oldest known hints of technical analysis appear in joseph de la Vega’s accounts of Dutch markets in the 17th century. In Asia, the oldest example of technical analysis is thought to be a method developed by hommamunehisa during early 18th century which evolved into the sue of candlestick techniques, and today it is major charting techniques used by major fund houses.
“the dumbest reason in the world to buy a stock is because it’s going up”
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