basic examination Vs Technical examination
Investing success, making money in stocks, and accumulating wealth is everyone’s dominant goal. Reaching that ultimate goal of retirement security requires an investment strategy that will make your money work hard for you, and at the same time avoid excessive risk, setbacks, and loses. Technical examination and basic examination are the two meaningful points to financial success, but vary greatly in their approach to investing.
basic examination focuses on the financial statements, the real data, of the company being evaluated. To estimate the value of a stock, basic examination uses the revenues, earnings, future growth, return on equity, profit margins and other data to determine a company’s inner value and possible for future growth. Although basic examination is important, most investors do not have the skill, the desire, or the time to peruse a company’s financials in efforts to determine whether it would be a good investment or not. And with accounting shenanigans some companies have implemented to cook the books, the fundamentals can be seemingly worthless.
Technical examination however, is a method of evaluating securities by analyzing the statistics generated by market activity, such as past prices and quantity. Some technical analysts do not attempt to measure a company’s inherent value, but instead use charts and other tools to clarify patterns that can suggest future price movement. Technical examination was introduced more than 100 years ago by Charles H. Dow from a series of Wall Street Journal editorials he authored and afterward became known as The Dow Theory. The basic factors of his theory have held true for more than a century and are the foundation of technical examination today. Dow believed the market discounts everything and this information shows up in the price movements of not only the over-all market, but individual stocks in addition. moment news access in today’s world solidifies the fact that everything truly is discounted in the price of a stock and the movement of the market.
However, the wise investor should always take a two-fold approach to be successful. In other words, use some shared sense. The basic, known fundamentals of a company are freely obtainable and revealed in the Price Earnings Ratio (PE) and the Earnings per proportion (EPS). To avoid the fly-by-night companies with no real earnings, make sure the EPS and the PE ratio are in line before putting your hard-earned cash at risk. Then with proper knowledge of Technical examination of the company and the over-all market, a truly wise investment decision can be made.
There is an old saying, “If you want to know the truth, then follow the money.”
It is true; charts are the footprint of money. Technical examination of the charts not only show the current and past performance of a stock, but also the price action gives the chartist a clear view of market sentiment and valuable insight as to the future direction. All necessary information is displayed in the chart. The price, quantity, sustain, resistance, trends, and much more. It is simply a matter of being knowledgeable in interpreting the information correctly.Charting and Technical examination uses the foundation of The Dow Theory and implements modern day charting techniques to give the investor a definite advantage. consequently, the informed investor can limit the risk and invest at the most opportune times avoiding markets declines, market corrections, and bear markets. By using time-tested examination, freely obtainable fundamentals, and some shared sense, the individual investor can be successful in any market.