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- Stock prices depend on both:
- fundamentals - current and future projections of growth and income
, and
- sentiment - unquantifiable investor emotion, ie fear and greed.
- Markets are generally efficient
(ie correctly priced), but anomalies can and do occur.
- Fundamental Analysis
- Picking stocks & shares from the analysis of fundamentals
such as the world & national economy, industry sector and individual
company's accounts and performance.
See Fundamental
Analysis (from Wikipedia)
- Technical Analysis
- Picking stocks & shares from the analysis of charts
(ie graphs of price movements, usually against time.
- Technical analysts (or chartists) believe past price movements
and patterns are a key to the future direction of prices.
- Chartists look for patterns such as head and shoulders
or double top (or bottom) to predict future prices.
- The merits of technical analysis are heavily disputed, but
- it is used, especially in short-term trading, and thus patterns
and trends may become self-fulfilling prophecies;
- it can provide a graphic illustration of market sentiment.
- See
Technical
Analysis (from Wikipedia)
An
introduction to Technical Analysis (from Investopedia.com)
Technical
Analysis from A to Z (from Equis International)
- International diversification
- Investing in international economies reduces risk from local recession;
but
- Adds risk from currency fluctuation.
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