Fundamental Analysis is the study of the whole company in depth and is an attempt to find the future earnings, say one/two/five years down the line, thus trying to predict the share prices.
Fundamental analysis involves studying balance sheets, cash flow statements, Profit and Loss account, Fututre growth prospect, order book of the company, commodity cycle etc.. Much of this data cannot be analysed by most small investors(Including any of us). Such predictions are made by analysts who specialise in a particular field (eg. Oil companies or textile or retail or Construction companies)
Fortunately, what is available to a small investor is good enough to differentiate between a good and a bad company, or to compare two companies in the same sector. This is good enough and definitely worth knowing, to say the least.
On the other hand, technical analysis is the study of the price and volume trend over a decent length of time and trying to predict the future price movements. This analysis does not consider any events that have occured. It is strictly based on just the Chart of the share price and volume. A technical analyst should not be governed by any kind of developments that have taken place around him, but should only restrict himself to what he infers from the chart of the share price.
Technical analysis is based on the fact that the share price move stictly on the basis of the developments that have taken place on ground. ie on the fundamentals. If u agree to this principal, then technical analysis can be justified, otherwise, this is not for you. This is a very interesting field of study, specially for those who are from a science background.
I have a personal opinion, that Fundamental analysis is for an Investor, while Technical analysis is for traders. This may not be agreed by many people.
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