Fundamental Analysis VS. Technical Analysis
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Fundamental Analysis VS. Technical Analysis

 

Welcome back to our penny stock trading terminology series.

Today I’d like to cover the difference between fundamental analysis and technical analysis.

These are two different ways of looking at stocks, both of which are super important depending on the type of trading you're doing.

 

Fundamental Analysis 

The first type of analysis that people tend to do with stocks is fundamental analysis.

So, what that essentially means is you're looking into all of the qualitative factors or characteristics regarding the stock.

 

Qualitative factors include:

  • the ticker symbols
  • the company names
  • the industry are they in
  • what the company does
  • how much revenue they make

 

You need to look at their financials, you look at their story, you look at their management team.

 

That's what Wall Street does.

That's what Wall Street excels at.

That's what analysts get paid to do and that's where a majority of the money's made.

 

Unfortunately, for penny stock trading, fundamental analysis is rarely ever used.

 

  • I've traded probably hundreds of socks or if not thousands of stocks in my lifetime, and I probably know only the names of maybe a handful of them and the industry and products have maybe less than 20 of them.

 

The part that does matter regarding fundamental analysis is the news that comes out about them, the catalysts, as we've discussed before.

 

The only important parts of fundamental analysis that you should bring in to your trading and your strategy are:

  • the research you do
  • the workflow that you have for researching stocks

 

Don't Buy the Hype

The number one common mistake I see stock traders doing is buying into the story of whatever penny stock they're trading.

Unfortunately, most companies that come into penny stocks are kind of scheme-y.

They're using some reverse merger financing tactics.

If you are the owner of a penny stock company, there's no offense being made. I'm just telling you what's happening in a majority of the market, which might not apply to you.

 

  • But in general, penny stocks are really just being traded for financing tactics and for pump and dump schemes.

 

So essentially, when you're doing stock trading through the IPS of In Penny Stock method, the only fundamental analysis you need to be wary of are news releases and press releases, because they'll affect this price of a stock on that day.

  •  Usually, you want to pair that up with a technical indicator or technical analysis.

 

 

Technical Analysis

Simply put, technical analysis is when you are looking at the actual quantitative metrics of the stock.

That really just means you're just looking at the stock price chart over a period of time.

  •  The action of a price can actually tell you a story about the stock.

 

It can tell you where it's going to go, and in a way, it's actually the secret that institutions use in order to talk to each other.

 

You don't think that Wall Street knows where the price of the stock is going?

You don't think that they know when the trend is going to go up, going to go down, and how they communicate with each other?

 

They're multi-billionaires and trillionaires for a reason.

 

I'm talking about the companies as a whole, but the technical analysis, support, and resistance are the basic technical analysis indicators they are using.

If you're able to look at technical analysis in a certain fashion, you'll also be able to profit off of it through penny stock trading.

 

Conclusion

Again, keep in mind, for penny stock trading, you don't really care about the story of the company.

That's not why you're buying it.

You're just trying to make money off of the price action.

 

The reason I've been successful and the reason my students are is that we play the highest statistics.

We're just leveraging the probability in our favor as much as possible.

 

So, trade after trade after trade, we're winning as many times as possible.

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