Things you need to know about Stock Market Analysis

When it comes to the topic of trading or investing in the stock market, one factor that can make or break the number of returns you generate is how you conduct your Stock Market Analysis.

In simple terms, Stock Market Analysis is the study that you conduct on a particular company, its share price, and the current market trends.

This study is what impacts your trading and investing decisions.

1. Why is conducting Stock Market analysis so important?

As mentioned earlier, your analysis before making any trading or investing decision is directly related to your returns.

Take for example ‘Company A’, which is already a market leader in its industry. It is known that this company has generated moderate but consistent returns for its investors. Then pit it against ‘Company B’, which is a comparatively smaller company but has great potential because it is catering to a market that is currently untapped.

Now, if you were to choose company B to invest in for the long term, it has a great chance of providing better returns compared to Company A. The reason this holds true is that not a lot of people have made the same observation that you have. This means that the share price has yet to go up.

This was one tiny example of how having good foresight can help in making investing decisions. Also, this analysis is a part of Fundamental Analysis.

2. You can use News in your Stock Market Analysis

It is a known fact in the stock market community that the news of a particular day decides the direction in which the market will head. One recent example is that of the news of coronavirus. Ever since the virus outbreak, things have looked bleak for several economies all around the world. This is because of the lockdowns that followed and several businesses, especially SMEs, had to halt their operations. When a business has to halt its operations, it impacts its profit-making ability, which leads to people losing faith in the company. What happens next is that investors sell their shares and this causes a downfall in the share price.

The point that is being made here is that any news that relates to a country’s economy or a particular industry, or even a sole company, causes an impact on the share prices. This impact can be either positive or negative, and how investors use it to their advantage is what makes a successful investor.

3. You can make use of Technical tools for your Stock Market Analysis

The previous point spoke about the impact that news plays on the share price. This means that news is one of the tools in an investor’s arsenal. Similar to that, there are also tools such as indicators, support and resistance, price patterns, and much more. These tools fall under the category of Technical Analysis and can help an investor better time the market.

The best way of conducting Technical Analysis is to keep things simple. Out of the thousands of tools available, one can select the few that they are comfortable with. Next, they should do some research on how that tool has worked in the past. Has the share price gone up when the tool indicated it will, and so on. If in the majority of times that answer is yes, one can go ahead and implement that tool for their trading decisions.

Technical Analysis is a vast topic and cannot be covered entirely in this blog post. It also requires several hours of research before any money is to be put in the market. Investors are advised to complete this study period before making any investments.

4. You can read a company’s annual report as part of your Stock Market Analysis

In case you don’t want to be nitpicky about timing your entry into the stock market and are just looking to invest for the long term, Fundamental Analysis is the tool for you. With the help of fundamental analysis, you can determine how much debt a company is in. You can also see whether it has been working towards repaying that debt and whether it is making consistent profits over the years. This is important because when it comes to investing, consistency is key. A company that is unable to clear its debts does not have a long future.

To conduct this form of analysis, one must be well versed in reading a company’s Annual Report. The annual report contains all the details about a company’s business such as the products it sells, its strategies for improvement, what markets it targets and so much more. Knowing about a business so deeply gives an investor peace of mind when investing. This analysis tells you how healthy a company is and a healthy company is a profitable company.

5. Do you need Technical and Fundamental tools for your Stock Market Analysis?

The short answer is that it completely depends. The factors that it depends on are how long do you plan on staying invested. If you are looking to do some swing trading then it is not very important to know whether the company has been profitable for a long time or not. Similarly, if you are looking to invest until you retire, which is in a few decades, it doesn’t matter that a stock is trading above its 50 day EMA.

However, ideally, making use of both Technical and Fundamental Analysis is preferred. Say you are looking to invest for 20 years and have your eye on a company. You know that it is fundamentally healthy and want to get it at the best price possible. This is where Technical analysis can help an investor. Similarly, say one has found the perfect time to enter into a stock for a swing trade. Knowing that the company is financially healthy can provide the trader with an added boost of confidence in making that trading decision.


The final takeaway from this is that Stock Market Analysis is extremely important before making any trading or investing decision. The two components, Technical and Fundamental Analysis should be properly studied, and only then should one put their money in the stock market.



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