Yesterday, as I wrote a post about a recent trading strategy, I got a message from 
Here I am going to assume, the word "trading" as it relates to the stock market. The two main ways to analyze individual stocks are called:
Generated with AI ∙ September 24, 2024 at 3:57 PM
Fundamental Analysis is mostly applicable to stock market of individual stocks, while Technical Analysis is a price/volume action of any tradable instrument and can be applied to any market, including crypto.
Fundamental analysis is a method used to evaluate the intrinsic value of a company by examining its financial statements, industry trends, and economic conditions. This approach focuses on understanding the underlying health and potential of a company, rather than relying solely on market fluctuations.
Key financial statements analyzed in fundamental analysis include the income statement, balance sheet, and cash flow statement. These documents provide insights into a company's profitability, financial position, and cash generation capabilities. By studying these statements, investors can assess factors such as revenue growth, expense management, debt levels, and cash flow efficiency.
Beyond financial statements, fundamental analysis also considers qualitative factors such as a company's management team, competitive advantage, industry trends, and economic outlook. A strong management team can significantly influence a company's success, while a competitive advantage, such as a patented technology or strong brand recognition, can provide a sustainable edge in the marketplace. Understanding industry trends and economic conditions can help investors assess the potential risks and opportunities facing a company.
Technical analysis is a method used to predict future stock price movements based on the historical price action and trading volume. It involves studying charts and patterns to identify trends, support and resistance levels, and other technical indicators that can signal potential buying or selling opportunities.
Technical analysts believe that market prices reflect all available information, including fundamental factors. Therefore, they focus on analyzing price patterns and trends, rather than relying on detailed financial analysis. Common technical indicators used include moving averages, relative strength index (RSI), Bollinger Bands, and MACD.
price is always right
By studying charts and technical indicators, investors can identify potential entry and exit points, manage risk, and make informed trading decisions. However, it's important to note that technical analysis is not foolproof and should be used in conjunction with other forms of analysis, such as fundamental analysis.
I must convey the disclaimer here that there is no silver bullet in terms of success in the financial market, there is no holy grail. No one can chart the "future" althrough we say we do. I know I have written a heading earlier. The reason sometimes it becomes possible, is because of the herd mentality. We make it possible. If lots of traders follows the same principle, with a common directional goal, that tend to happen. That said, always remember:
Price have no memory, it can't think
Okay, with that out of the way, let us talk about a few books. In fact, since there are overwhelming amount of books out there, I will mention only two. It is not that they are the best, but they are certainly easy read. One based mostly on fundamental analysis (it is a bit of a mix), and the other on technical analysis.
| John F Carter | William J. O'Neil |
I know the title of O'Neil's book is cheesy, but trust me it is a good book for beginners, and nothing out there can compete with the simplicity of that book. The first edition of "How to Make Money in Stocks" by William J. O'Neil was published in 1988, and I can tell you it did stand the test of time and is still relevant. Carter's book is more modern and talks a lot about how to deal with your life if you do decide to trade for a living.
These days, majority of the resources of stock market analysis are available online, a lot of them are for free (with annoying ads). Here are a few of my go to resources, if someone asks a question:
Ads are getting annoying though in all these websites, but each of them have a subscription service with a free trial. I don't have any of the paid version, because, I have thinkorswim for many years through my brokerage and you don't really need anything else if you have it.
Thats about it! Happy trading.
