Understanding technical and fundamental analysis

Many types of analysis are presently available now for doing good research. Basically, it has two major categories. One is fundamental analysis and another is technical analysis. Both involve different technology and analysis process. However, both got used for predicting the future of crypto markets. So, it is essential to understand the basics of both types of analysis.

Fundamental Analysis Concepts

While doing the research, through fundamental analysis, one considers multiple factors. This analysis gives the intrinsic or inherent properties of the specific crypto. In this analysis, one tries to find the impact on the share’s integral value. One has to do thorough research to understand the factor that affects the price of the crypto. This gives the analyst an idea about the Competency of the correctness of the crypto’s price. It considers the macro and microeconomic factors that have an influence on the cryptos. One uses the qualitative as well as quantitative metrics for this type of research.

Different metrics used for Fundamental Analysis

Some of the qualitative metrics include:

1. Competency of the management
2. The intangible assets the company has
3. Company’s working strategy
4. Global acceptance of the business
5. The industry’s customer base
6. The competitive edge the company has

Some of the quantitative metrics include:

1. The company’s annual revenue
2. The total profit of the company
3. Tangible assets of the company
4. The accounting ratios of the company

What we know after fundamental analysis

Using this analysis, the analyst predicts if the price of the security as compared to the market. He will be able to know if the crypto’s price is more or less as compared to the market. A higher value is an indication that the estimated value is more than the actual and vice-versa. After this analysis, traders decide to buy or sell their shares. If it is undervalued crypto, traders prefer to buy that crypto and vice-versa.

Technical Analysis

The major difference here is the consideration of the past history of the crypto. The analyst considers the crypto’s historical data to predict the future price. So, this analysis includes the past prices, the company’s returns, and the volume of trade. The price prediction is based on the crypto’s historical movement. So, it is basically the trend of the movement of the crypto’s price.

What we know after technical analysis

In this analysis, the analysts refer to the range of price of the cryptos. This helps in generating a profitable trade. This helps them to understand whether to buy or sell the cryptos. If crypto is moving towards the lower range, the trader will buy the cryptos of that company. The reason is once the price hits the bottom of the range, it will move upwards. The exact opposite will happen when the price is moving upwards. So, the traders sell their cryptos to gain profit.

Conclusion

Both analyses are for determining the future price of the cryptos. The technical analysis is for short term trading mostly. The fundamental analysis is for long term trading predominately.