What are the different types of analysis a trader must be conscious about?

By the above statement different types of analysis, it simply means how a trader or investor estimates the future price movements as it is a high probability game not gambling. 

There are a large number of organizations who pay to Equity and derivative analysts to do the analysis for them and if they were gamblers those bankers would be picking anyone randomly from the streets and get the job done.

So, in this blog post we are going to learn about the different types of analysis one Trader or Investor must learn before diving into the stock markets. Have you guys ever wondered that how these big players earn constantly from the markets? The reason is they are good at analyzing and estimating the market movements and if you’ll look at their trading or investing style, you’ll find that they are masters at so many different kinds of methods which are available for everyone. 

The main goal of Trade Tales is to cut the noise and provide you with new and back tested modern methods of trading and investing so don’t forget you leave without scouting.

The different types of Analysis used by Traders and Investors are as follow-

1.Technical Analysis.

2.Fundamental Analysis.

3.Derivative Data Analysis.

Well, all of these are very vast methods so we’ll try to cover them in small parts with different blog posts but just to give you a glimpse about them let’s continue…

Technical Analysis is all about studying the charts and estimating the price movements solely based on what charting has to say. There are a lot of methods which are used by traders to anticipate such moves ex- Price action, Harmonics, Fibonacci, Elliot wave theory and much more. Some people often get confused when technical guys on their social media uses terms like RSI of ABC stock is 55, Stock might take support from the moving average 20 well all these are types of technical analysis indicators. In the past a lot of research has been done in this field and it has produced a lot of methods to trade Intraday, swing or even invest money solely based on technical analysis. 

But why does technical analysis work?? The answer to this question is “HISTORY REPEATS ITSELF”. Now what do I exactly mean by History repeats itself? So, in technical analysis basically we study the behavior of price action patterns in the past and how it played out after that because of the greed and fear we humans have. The way people reacted to those patterns because of Fear and Greed in the past we estimate that the same way they’ll react to it again as the psychology never changes only time does. 

Have a look at this Nifty 50’s chart how a previous channel breakout led to 2 years of Bull market and after that same thing happened over again in 2020 so what is your view about this chart do comment below. There is always a debate going on between technical analysts and fundamental analysts that technical analysis focuses on short time frames but here we can also estimate a long-term view as Technicals are somewhere displaying what fundamentals have to say. It basically depends on you what kind of analyst you aspire to become as both of them will definitely help you make money if you use the right approach.

Fundamental Analysis is a totally different approach from technical analysis as here the analyst has to study the business from various aspects like Demand supply scenario in the economy, peer comparisons, politics as one has to forecast a long-term view over the asset class in which the investor is interested. For short- term gains technical analysis is a much reliable method or one can adopt Techno – Funda analysis a mixture of both.  It’ll take you some time to get comfortable around Fundamental analysis as there are a lot of Data points which needs to be decoded to make a view over the markets. The basic knowledge about the business, financial reports, balance sheets, ratios etc. will get you started in Fundamental analysis.

Derivative Data Analysis is a completely different approach from both of these types of analysis and Traders are the ones who mostly prefer this type of analysis in sync with Technical analysis. Derivative data also called Futures and options data helps us on having a view that what are the big players doing in the market are they net sellers or buyers in the index future & options and stock futures & options. Further, more some people also use Open Interest to determine the support and resistance levels based on OI data. We’ve discussed about derivative data analysis in detail click here-

So, these were the main types of analysis a Trader and Investor must learn before starting their expedition in the stock markets and if you go through them slowly and nicely, you’ll be able to figure out which type of trader you are. 

Types of Traders-