Stock analysis definition (2024)

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CFDs are complex instruments. 70% of retail client accounts lose money when trading CFDs, with this investment provider. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money.
CFDs are complex instruments. 70% of retail client accounts lose money when trading CFDs, with this investment provider. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money.

What is stock analysis?

Stock analysis is the method used by a trader or investor to examine and evaluate the stock market. It is then used to make informed decisions about buying and selling shares. Stock analysis can also be referred to as market analysis, or equity analysis.

Stock analysis can be used to gain an insight in to the economy as a whole, the stock market, a specific sector or an individual stock.

Stock analysis is based on the idea that by studying market data from the past and present, traders can create a methodology for choosing which stocks to focus on, as well as a way to identify entry and exit points for their trades.

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Examples of stock analysis

Although stock analysis can take various forms, there are two main types that traders tend to favour. These are:

  • Technical analysis, which looks at the historical price charts of an asset, and studies previous market patterns in order to predict future movements. Traders will use key tools, like support and resistance lines, to ascertain market trends
  • Fundamental analysis, which looks at data from the company and from its macroeconomic environment to assess potential profits from trades. It focuses on data sources that are available to the public, such as a company’s balance sheet and revenue flows

Both varieties of stock analysis have the same intended outcome: to make the correct buying and selling decisions and choose the optimal times to place trades.

Some traders will devote all of their time to technical analysis, while other traders might stick to a purely fundamental analysis of markets. However, it is common to use a mixture of the two.

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Stock analysis definition (2024)
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