Assume you are with your family on holiday in another country and you decide to dine out in a famous food street. While you reach the food street you see many outlets serving similar food. Here you can use two different approach for selecting the outlet
- 1st – Inspect each shop one by one (quality of material, chief experience, taste, hygiene etc) and then make your choice
- 2nd – Observe the crowd and follow it (Outlet having most customers will be your choice irrespective of the food quality or taste
Now, if you made your choice by 1st method then you used the approach of fundamental analysis, whereas the second method is the approach of technical analysis
Technical analysis is the statistical analysis of stock data whereas fundamental analysis looks at companies performance through financial statements, overall economic environment and other factors which may influence companies performance.