Millions of Americans invest their hard-earned dollars in the stock market with the objective of meeting their future financial needs. There are many different approaches to investing in stocks, each of them designed to reduce some of the risk of investing while increasing returns. Every strategy has its advantages and disadvantages. You should try to find the approach best suited to your own financial situation and goals.
Investing strategies can be broken down into two broad categories: technical analysis and fundamental analysis. They are as different as night and day, but each camp has its followers and its critics.
Technical analysis is an attempt to use price charts and other mathematical indicators in order to predict future price movements of a stock. The method doesn't look at any outside factors, such as the company's financial statements or the overall economic outlook. It's strictly by the charts. Market technicians believe that the market price of a security reflects all known information about that security.
The downside of technical analysis is that it's very, well, technical. Although there are some excellent software programs specifically for technical analysis, the learning curve to just get started using these techniques can be formidable. Another disadvantage of technical analysis is that it requires you to actively follow current and potential holdings, reviewing charts and indicators each day or week. This means being glued to your computer screen for hours at a session, and can require ample number-crunching skills. Finally, technical analysis is often a short-term strategy, requiring you to make frequent trades and to pay the commissions and short-term capital gains taxes that result (that is, if you have any gains!)....
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