The Best Investing Techniques Use A Combination of Fundamental and Technical Analysis


Investing techniques tell you when to buy and when to sell.

Even if you pick the "right" investment per your process, you are not guaranteed a profit. Your success is determined after you buy AND sell the investment.

So you need a way to figure out when to buy and when to sell. Investing techniques give you those signals.

As with investing strategies, you can find pro's and con's for each type of technique, along with claims of huge profits. In the end, it is how well you follow and improve your rules that will determine your level of success.

The first thing you must always do, regardless of strategy or technique, is practice money management BEFORE you buy anything. It is critical for you to control risk and invest safely.

From my page on position sizing:

  1. Determine the Size of your Account or Portfolio
  2. Determine the Maximum Loss your Portfolio can Sustain
  3. Determine your Biggest Loss on an Individual Investment
  4. Calculate your Maximum Position Size ($$$ at risk)
  5. Select an Investment
  6. Calculate the Number of Shares to Purchase
  7. Check your Goals


The 2 Main Investing Techniques


Your investing process needs a way to tell you when to buy and sell. Rationally speaking, you really only have two alternatives: fundamental analysis and technical analysis.

You could always decide to invest in a company because you like the logo, but I don't think you'll get much help buying and selling after that...

All the different analysis techniques roll up into these two categories.

Fundamental analysis uses financial statements and economic data to estimate the value of an investment. The estimated "value" is then compared with the current market "price".

Technical analysis uses price changes over time to evaluate supply and demand for a particular investment, with the expectation that the current price captures all fundamental data.

Both types of analysis can be very simple or very complex. Many investors feel that more complexity means higher chances of being "right" about a stock price. Not only is this untrue, but being right does not mean making money.

Successful investors use a combination of both analysis techniques, based on market conditions, their preferences, and experience.

Safe Investing Tip
Safe Investing Tip:
Use fundamental investment techniques to check the financial health of an investment and technical to tell you when to buy it.

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