1. Fundamental
The reason that we call "fundamental" because when you pick the stock, you want a good stock. "Good" can be vey broad but, here, I will concentrate on "performance". How can we evaluate the company's performance? Basically or fundamentally, we will look at company's performance report and compare it with company's past performance, other similar types of companies' performance, and other different types of companies' performance.
The report I mentioned is "financial report". Someone might not want to read further after hearing about financial report which is somewhat complicated for them. I agree that financial report is, sometimes, very detailed and hard to understand. But, we don't need to read every page! We just need to know where to start and go from that. Trust me it will be more fun if you know where to start. After you know the fundamental track, then, you can have your own style built on that track. You might have a question that how can we make a difference if the information everyone has is the same. I can tell you that even though people read a financial report which has the same information every page, they might come up with different conclusion. For instance, have you ever seen all broker houses recommend the same thing for the same stock? I've never seen that. It might have, but I think it is very rare. The same stock at the same period, broker A might recommend "buy" but broker B recommend "sell" even though they had the same information from the financial report.......Why?......because they had a different experience, knowledge, and attitude. For example, if I ask you whether $1,000,000 is big. For me, $1,000,000 is big because it is hard to get that amount of money. However, if you ask a billionaire, they might say that it is very tiny (might feel like $100 for them). My point is people have different experience and attitude. That's why we could come up with a different conclusion even though we have the same exact information. What I just said is a "Micro fundamental" that we deeply go into one company through its financial report, but in terms of "Macro fundamental", we will analyze the environment surrounding that company, such as monetary policy, government spending, tax, trade cooperation (i.e., NAFTA).
2. Technical mechanism
The reason that we call "technique" because this mechanism needs some technical mathematical expertise. Shortly, technical mechanism is analyzing the historical information through mathematical tools. So, if stock A was just listed in the stock market yesterday, this approach is unlikely to be used because there is no historical information available.
I will give you some examples how to use a technical approach. Given that in the past 5 days (Mon-Fri) stock A's price is 5 8 6 8 7 respectively. One of the popular technique is "price average". 5-day price average of stock A is (5+8+6+8+7)/5 = 6.8. If next Monday, price of stock A open at 6.5, some investors might buy this stock at 6.5 out right for the reason that it was lower that 5-day price average. In the real world, there are different price average ranges such as 10, 100, 200 days to name a few.
I hope this article might give you some idea about fundamental and technical approach. Next article, we will go into more depth.
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