What is the difference between technical and fundamental analysis for portfolio allocation?

Technical analysis is about information projected visibly to you in form or candlesticks, line chart, barchart, renko etc on the chart. The primary dependence on price action and indicators to trade is technical analysis. This can help to take short term trading decision to interpret a bias and execute trades base on that.

Technical analysis is the right direction to know more about stock movements and trend lines. It gives the opportunity for traders when to get in and get out. It is a full proof system to traders to have the opportunity to know how far the the price movement would go and end.

Simply put, technical analysis purely measures the market movement looking at stock price movements at different viewpoints with regards to time periods, i.e realtime, 15 min delayed, hourly, daily, monthly, etc. It measures the reaction of the markets based off a company's published financials and or analysts' forecasts / analysis.

It is all about predicting future share prices based on past data. This can be done using charts and studying patterns to make better decisions.

Technical and fundamental analysis are two distinct investment decision-making methods in financial markets. Technical analysis uses historical price and volume data, chart patterns, and technical indicators to predict future price movements. It is primarily used for short-term trading opportunities, while fundamental analysis focuses on the intrinsic value of an asset. Technical analysis is widely applied to various asset classes, while fundamental analysis is primarily used for stocks. Both methods are used in portfolio allocation, with many investors and portfolio managers combining them for a comprehensive view of market and investment opportunities.

Technical analysis deals with details such as price movements, oscillations, and trends over the years. This analysis focuses on the micro elements of the economy. Fundamental analysis sees the problem in the macroeconomic aspect. It analyzes the different factors of the economy and makes predictions for the future.

Fundamental analysis is the release of economic data, deals with macro and micro economy, global events, central banks engagement through the central bank governor or the president's speech. These are two different classes of perspective and has a lot to do with asset price delivery. Fundamental indicators in the market includes Consumer Price Index (CPI) Interest rate, Non-farm payroll (NFP) and alot more. They have significant role to play pertaining to the economy state of the country and hence, affects the currency of such country.

Technical analysis is a valuable tool that can be used to make informed trading decisions. By studying price movements, patterns, trends, and indicators, technical analysts can identify potential opportunities to buy and sell securities. However, it is important to remember that technical analysis is not a foolproof method, and there is no guarantee that it will always lead to successful trades.

Fundamental analysis involves checking health of a company before investing. This can be done by looking into company’s financials, management, industry and competition.

In basic terms: it looks at a company's financial wealth, outlined in its Income Statement and Balance Sheet. From these, investment analysts from both the buyside and sellside formulate their ratio calculations as part of their sell or buy strategies that ultimately have a direct impact on that company's stock price.

Deciding on how much money is going to be invested in different assets. This is dependent upon one’s risk appetite, age, goals.

Fundamental analysis is a cornerstone of sound investing. It provides a systematic approach to evaluating the intrinsic value of an asset, allowing investors to make informed decisions based on a company's underlying financial health, business prospects, and competitive landscape. By delving into a company's financial statements, industry trends, and macroeconomic factors, fundamental analysts can uncover hidden gems that may be undervalued by the market or identify potential risks that could lead to a decline in share prices.

I look at portfolio allocation from a diversified perspective. I like to have a reasonable number of holdings so I can see what is working, and what is not. Sometimes I'll trim a position that has outperformed and add to a position that has lagged but only if there is a rational fundamental catalyst for doing so. The investment landscape available to investors has become deeper and wider than ever before with the advent of ETFs. This allows investors to drill down into specific ideas that are still diversified but also targeted. This flies largely in the face of how most wealth managers have commoditized their portfolios over the past 10 years; outsourcing to be the benchmark first and foremost.

Before you allocate your portfolio, understand the clear advantages of such diversification. What asset class would be affected most or less with certain fundamental outlook? What would be the end goal of diversifying in an asset in a particular sector at the point you want to do that? That means you can not buy or sell any asset at will without understanding few things from both classes of perspective (technical and fundamental) Buying gold as a safe haven is a common investment in diversification of portfolio when there is high surge in inflation.

Portfolio allocation is the strategic distribution of investments across diverse asset classes, balancing risk and return to achieve financial goals. It's akin to orchestrating a symphony, harmonizing disciplines like economics, mathematics, psychology, and risk management. By allocating resources effectively, investors aim to optimize performance while minimizing exposure to market fluctuations, creating a robust investment portfolio.

I think it was best said by John J. Murphy in the forward to his book on Technical Analysis...and I quote...'...Technical Analysis is the leading indicator to fundamental analysis...'.

Pros and cons reflect in both technical and fundamentals. - Technical has a limitation in knowing "when" even if you know "where" the market will react. Fundamental may give more insight in that as there is a date and time for the release of such data. -Fundamentals can rapidly move and deliver price to an anticipated zone of a technical analyst and quickly return to previous price as if nothing happened actually. Technical may points out why there is high probability at a zone and expect reaction before impulsive move, that may play out just like that, meaning technical analyst can still make buck from such move after a retracement because the market price was delivering slowly and not a fast and rapid speed of fundamentals.

Key Considerations for Portfolio Allocation: Risk Profile: Your risk profile reflects your tolerance for potential losses and aligns with your overall financial goals. Investment Horizon: Long-term investors have a longer timeframe to weather market fluctuations, allowing for a higher allocation to riskier assets like stocks. Conversely, short-term investors may prioritize stability and allocate more to bonds or other low-risk assets. Return Objectives: Higher return objectives may lead to a higher allocation to riskier assets, while lower return objectives may favor more conservative asset allocation.

As an experienced trader, I've found technical analysis invaluable for short-term trading, offering clear entry and exit signals based on market trends. However, fundamental analysis provides a broader perspective, guiding long-term investments by assessing underlying value. Both approaches have merits and drawbacks, so I blend them judiciously to navigate the complexities of financial markets and maximize returns.

Although each discipline still interprets its inputs using the analyst's methodologies, Technical Analysis is more objective than Fundamental Analysis. T/A's inputs are significantly fewer and inherently objective, being a session or other time period's opening price, high, low, close, and volume. Meanwhile, Fundamental Analysis can be breakup value, present value cash flow, earnings multiple, etc., each needing to assume a future value. Technical Analysis must still be performed intelligently to be of value, but that process is much simpler to conduct.

For entrepreneurs and content providers, blending distinct skills is a potent strategy to outshine competitors and achieve objectives. Similarly, in the realm of investments, marrying advanced technical skills with profound fundamental analysis forms the winning formula for long-term wealth creation. While many successful investors focus solely on fundamentals emphasizing balance sheets, intrinsic value, and overall business performance integrating high-level technical skills enables me to adjust positions. By trimming overbought assets and repurchasing in oversold conditions, this straightforward technique generates additional cash flow, fostering enhanced performance over the long run.

There is nothing sweeter than this in analysing. Viewing from both perspectives will give deeper insights to know the longterm bias and short term bias as well to know the intention of traders in each asset class time frame. When I started trading, I was thinking it was all about the chart, until fundamental made market hit my stop loss few times before i learnt my lessons. The truth is the both works well and perfect if harmonized perfectly, higher probability trades are more common here.

A combination of both (i.e Technical Analysis and Fundamental Analysis) has worked like magic for me. Use Fundamentals like debt to equity ratio, ROE, ROCE, Revenue and PAT growth to select stocks. Use Technical Analysis - price action - for entry. Say for example, a stock has ROE and ROCE above 15%, Debt to Equity < 1 and Revenue and Profit growth (5 years average) above 10%. If such a stock is trading around its 200 day moving average then it becomes a “buy” for me.

When I first began using Value Investing, I realized it didn't match my lifestyle or needs. You have to test different approaches to find the one that fits your personal preferences. No single style works for everyone, so through experience, you'll discover which style suits you best. I do not use any of the fundamentals or financial ratios, but follow the trends!

I use fundamental analysis as well as technical analysis in Portfolio Allocation. Fundamental analysis includes studying the business of a particular company I am interested in, listening to its con-calls, reading transcripts and determining if the company has scalable future prospects. Once I decide to invest in a company, I use technicals and charts to determine what price to enter the stock. Some times even the valuation is attractive, the stock is in downtrend and may continue for a while before it bottoms out. Technicals help in gauging that. In short fundamentals tell me what to buy, technicals when to buy.

These days, I don't pay much attention to fundamentals. Instead, I go with the trend and have a stop-loss in case things go south. When it comes to following trends, there's no overthinking, no financial ratios, and no complicated charts. I just use moving averages along with some rules, and this approach can turn someone into a "SYSTEMATIC TRADER or INVESTOR." An equal allocation of 20 to 30 stocks with a large enough stop-loss to accommodate the volatility is good to make some decent profits over the long term.

The choice of method should align with your long-term goals. For some, technical analysis may be sufficient, while others may require fundamental analysis. Whatever path you choose, it's crucial to be clear about your objectives beforehand. Create a plan and consistently work towards its implementation. Because nothing costs more money than constantly jumping back and forth between goals.

For portofolio allocation , fundmentaly you chose the sector and companies , technically you know from where you will pick up your shares in specific prices

Technical analysis can sometimes be a self-fulfilling prophecy if a large enough group of traders start to act on the same signals.