LONDON, May 30, 2012 /PRNewswire/ --
Financial and technical analysis are the two most common trading techniques used by traders and spread bettors alike, with a vast majority using either one or the other technique, or a combination of both, to make profitable trading decisions.
Read on for a guide to technical and fundamental analysis with online financial spread betting provider Finspreads:
Technical analysis is used to spot future price trends using charts and historical data and relies on the key assumption that history is likely to repeat itself. Technical analysts often use historical price trends to predict the direction in which prices will move in the future, disregarding factors such as news reports, economic factors etc.
Fundamental analysis, on the other hand, emphasis solely on the here and now, analysing factors such as economic data, politics, news events etc to determine their impact on prices.
How is technical analysis different from fundamental analysis?
Technical analysis looks purely at the price action of a market (current and historic price trends), while ignoring factors such as news and economic data, political events etc, to draw conclusions about whether prices will go up or down in the future.
Fundamental analysis, on the other hand, essentially assesses the basic fundamentals that may drive demand in a particular market (for example news events, economic data, politics etc).
Take the recent Facebook IPO launch for example. Fundamental analysts would examine the hype surrounding Facebook shares, as well as look at analyst forecasts and news reports, as well as factor in the global economic scenario, before determining their trading strategy for Facebook shares in the near future.
Technical analysts, on the other hand, would look at price data alone, including the price trends of other technology IPOs such as Google and Amazon, and their performance in the months following the launch of trading to determine the future direction of Facebook shares.
Take a position with Spread Betting
Spread betting provider Finspreads offers prices on thousands of markets, so you can take a position irrespective of whether a company's share price is rising or falling.
This means that as an investor, you only need to determine the direction in which prices will move in the coming days. If you were right and the markets move in the direction you had indicated, you make a profit; else you net a loss.
Spread betting is a leveraged product which can result in losses greater than your initial deposit. Ensure you fully understand the risks.
*Spread betting is exempt from UK stamp duty and Capital Gains Tax (CGT). However, tax laws are subject to change and depend on individual circumstances. Please seek independent advice if necessary.
Finspreads is a leading online financial spread betting firm, offering access to thousands of instruments on the world's financial markets.
The company pioneered fully interactive online spread betting in 1999 and continues to invest in technology to ensure that its service remains amongst the market leaders.