Fundamental analysis is a method which should be avoided for day trading in the market.
This method is practised for investing and generally with a medium to long term horizon. This method should completely be avoided by intraday traders.
| Table of Contents |
|---|
| Price Movement |
| Duration |
| Short-term Trading Opportunities |
| Impact of Volume and Block deals |
| Difference in Tools for Analysis |
Intraday traders should avoid fundamental analysis because of the following reasons-
1. Price Movement :
Intraday trading involves the daily price movement of stocks which is performed through technical analysis irrespective of the fundamental aspects like the Balance Sheet of the company, its business model, etc.
Fundamental analysis does not impact the company’s price movement regularly hence it is not beneficial for a trader’s mentality.
2. Duration:
Intraday trading is for short term movements in the prices of the stock which are governed by some technical parameters, derivative analytics, newsflow, etc.
Fundamental is a long term analysis, which does not consider the short term impact on the prices which can be due to various other factors.
3. Short-term Trading Opportunities :
Fundamentals of the company do not change on a daily basis but the opportunities under the price movement can be captured by intraday trading.
Intraday trading is basically for tapping the short term opportunities based on news flow etc like results announced vs estimates.
4. Impact of Volume and Block deals:
Intraday trading takes into account the volumes, bulk/block deals, or HNI Investors or Institutional Interest for making trading decisions that don’t impact the fundamentals of the company.
5. Difference in Tools for Analysis:
Intraday trading takes into account many technical parameters, chart analysis, Price volume action, demand-supply metrics, breakouts, etc which does not have anything to do with Fundamental Analysis
These are a few of the reasons which make it clear why fundamental analysis should be performed for a long term basis of investment for the creation of wealth and avoided for intraday trading.
Key Takeaways:
- Fundamental analysis is practised for investing and generally with a medium to long term horizon.
- Fundamental analysis does not impact the company’s price movement regularly hence it is not beneficial for a trader’s mentality.
- Fundamental is a long term analysis, which does not consider the short term impact on the prices which can be due to various other factors.
- Fundamentals of the company do not change on a daily basis but the opportunities under the price movement can be captured by intraday trading.
Happy Learning!
