If you want to buy stock A at a price of Rp. 1,000, what is the basis for your decision to buy the stock?
This is what I'll cover in this post: How to analyze a stock. The decision to buy and sell shares should be based on a logical analysis, not just guessing without direction, guessing without seeing. If you want to analyze a stock to decide whether it is worth buying or not, there are three commonly used analytical approaches:
First: Technical analysis. Technical analysis is an analysis used to predict stock prices using historical data, such as price information, volume, candlesticks and charts. In general, technical analysis is used for market participants who want to play short-term stocks (under 1 year). Users of technical analysis who play / trade short term are called traders. Technical analysis, which mostly emphasizes the function of the chart in its use, is even usually used by traders for only a few days.
Can technical analysis not be used for the long term? Can. But I will not discuss how to invest using technical analysis for the long term, because I am not an expert.
There are tons of technical analysis that you can learn. For example, studying candlesticks, stochastic oscillators, moving averages, relative strength indexes and others. If you need a more understanding of technical analysis, this Stock Gain website will later discuss technical analysis a lot.
Second. Fundamental analysis. Fundamental analysis focuses on analysis that studies the company's financial statements, the company's long-term prospects, the company's condition and other matters related to the company's performance in the future. So, fundamental analysis is used for long-term investments. Users of fundamental analysis are called investors.
Because fundamental analysis is an investment, it means that if you want to invest you have to keep stocks for the long term and not rush to sell the stocks you hold. Fundamentals will not be affected by price fluctuations like a technical analyst.
Does that mean fundamental analysis ignores technical analysis?
Of course not. There are times when a fundamentalist looks at a chart of stock price movements. More precisely look at TRENDS. A fundamentalist can buy stocks for the long term when the company's future performance prospects and trends, the stock price is discounted. However, a fundamentalist still looks ahead in buying a company, not looking at short-term trends.
Third. Behavioral analysis and other analysis. Other analysis means analysis outside of technical and fundamental analysis. For example: You buy stock based on a bid-offer. You buy stocks by looking at running trades (behavioral analysis). And others whose essence is not part of technical and fundamental analysis. You should use other analysis and you combine it with technical analysis.
So, if you want to buy stocks for short term, daily - weekly timeframe, you are very concerned about price fluctuations, you should study technical analysis, not study the company's financial statements or company prospects for the next few years. This approach is only used if you intend to become a stock investor, who dares to hold shares for a fairly long period of time. If you're reading this post of mine, it's a good idea to also read the post: Become a Stock Trader or Investor? - Part I. Also read: Become a Stock Trader or Investor? - Part II.
