Take Advantage of Both Worlds - Technical and Fundamental Analysis

Submitted by Stock Market News on 24 May, 2011 - 16:47

How to utilize both technical and fundamental analysis

Much has been said about the debate whether which one is more efficient: Technical or Fundamental analysis. Some prefer to based their decision on a stock's movement in the market, while others prefer to look into a company to know what they are buying for. Technical analysts prefer to spend their time on price action and chart patterns without the need to research on the stock's company. Fundamental analysts on their other hand prefer to look into a company's annual performance to make sure that they are not buying some shoddy business. Both of them have their pros and cons, but some are able to combine the two in their investment portfolio.

The deciding factor in deciding which one to use is determined by asking yourself: are you a trader or an investor? If you are a trader then technical analysis is more suitable, but if your an investor fundamental analysis is the way to go. But one of the best ways to make more money out of the stock market is to diversify. Other traders are able to have a portion of their portfolio solely for trading and the rest for investment. In this case, how do you allocate funds?

The best way is to allocate a fixed proportion. If you are a full time trader then you can allocate a bigger chunk of it to trading, lets say 70 percent, then leave the rest for investment so you can have a passive income. It will depend on which side you spend more time on. You can switch between the two depending on the market's condition. Its not bad to step away from trading for awhile - stress can fuel emotions that can influence you to make mistakes.

There are different ways to make money from the market, but that doesn't mean you can only focus on just one. However don't spread yourself tot thin and develop the ones that you know. Whether you use technical or fundamental analysis, profitability in the end depends on you.

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