Which is better - Fundamental Analysis or Technical Analysis? This is one of the questions I have come across too often. Both have their roles in the Stock Market and the exact utilisation will vary from person to person. Let me share my approach:
- When I invest for long term, I use Fundamental Analysis. Apart from the industry prospects and the quality of Management, I look at a few turn-over ratios and profitability ratios. But even for long term investments, I utilise Technical Analysis for entry. For example, I have a fair amount of success with saucer formations, particularly in weekly charts. Some of my friends, who are strict ‘Fundamentalists’ ask my opinion on Technical Positions. I can give the recent example of Cummins India; I had given them a target of 640 and the current price is much above that.
- Whenever I trade in the Stock Market with a time horizon of less than three years, I use Technical Analysis. I mainly use candlestick charts, formations and two indicators viz., Parabolic SAR and Average Directional Index. Of course, I don’t touch the shares of unknown companies.
- I don’t get carried away by the opinion of others, since I have been practicing the above for the last 20 years. I must confess that whenever I deviated from my approach, I always incurred losses.
Always counsel with your Financial Mentor and make the investments in line with your Financial Plan.
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