Understanding the Beast-Chapter 1

Let’s start with the two popular styles followed by investors to invest in the stock market. They namely are:

• Fundamental  analysis
• Chart Analysis

Some investors choose to analyze a stock using only one of the above, but according to me you need both of the  above mentioned skills to get a clear picture.

Fundamental Analysis

Fundamental analysis basically refers to analyzing the financials, performance. In lay man’s terms this means that you are finding out how the company has been performing, has it been making a loss or a profit, is the company in too much debt, is the company utilizing its money and the most important one-“Is the company growing”. You can find out all of this by looking at the financials of the company. The most important parts of a company’s financials are:

• Balance Sheet
• Profit and Loss Account[P&L]
• Cash Flow
• Quarterly Results

These are the basic financials of the company one must analyze before investing in it. I’ll be explaining more about this in my next post.

Chart Analysis

Now as we all know that the financials of the company aren’t all that need to be analyzed. The movement of a stock on the stock market is also because of investor sentiment. This is a big factor in the stock market; investor sentiment plays a major factor on the direction of a particular stock. We can judge investor sentiment to a certain extent using the charts of the basic stocks. The Basic tools we must familiarize ourselves with in order to successfully analyze stocks are:

• Moving Averages [Simple and exponential]
• Volume
• Trendlines
• Chaikin Money Flow
• OHLC Chart type
• Gaps and Basic Chart Patterns

As we familiarize ourselves with this we will delve deeper into chart analysis and learn more complicated stuff.

For now this will be all, my next post will explain Fundamental analysis more clearly. Till then I want every one of you to get to know the site www.moneycontrol.com, create an account and a portfolio because trust me while you learn stock market investing, this site will be your best friend.