In-Depth Analysis

Among the benefits of Better Trades is the in-depth analysis presented on this site.

In-depth analysis is important when it comes time to decide whether to buy or sell a stock or an option. With the proper analysis a trader is very likely to make a mistake and when you make an error while trading a stock, it's very likely to cause a financial pinch in the wallet.

What is important when it comes to in-depth analysis? There are two major schools of thought when it comes to Better Trades, fundamental analysis and technical analysis.

Fundamental analysis is the long-held opinion that investments should be based on the soundness of a company. If a company has sound management, makes the right decisions, avoids getting in too much debt and takes the right course, it will be a good investment. Fundamental analysis believes you buy a company that is undervalued and hold on to it in the belief that it will eventual rise to the proper valuation, leaving the investor with a profit. This is known as the buy-and-hold method of investing and is fueled by in-depth fundamental analysis.

What sort of fundamental facts are checked? Important data to look at when conducting in-depth analysis includes the price-to-earnings ratio, earnings per share, dividends, earnings, assets and liabilities and ratios, such as price-to-book ratio and price-to-revenue ratio. They are all important parts of the fundamental analysis process.

Technical analysis is based on the way a company has performed and how such performances are expected to affect the future of the stock. Technical analysis is based on a stock's price graph and uses patterns and indicators to give a trader a clue about which direction the stock may be headed. Among the technical indicators commonly used are moving averages, Bollinger Bands, Fibonacci lines, MACD, and the Relative Strength Index.

Those who practice technical analysis differ greatly from those who use fundamental analysis. Technical traders see stocks in a short-term window, buying and selling over and over to take repeated profits. Technical advocates are best described as traders, as opposed to fundamental traders, who are best described as investors.

Either method can be valuable. Even technical traders admit that the recent recession has brought many good stocks to such low levels that fundamentals need to be given a cursory check. It can prevent the buyer from purchasing a stock that has internal problems. And that is not recommended by Better Trades!