Fundamental Analysis

Fundamental analysis is an stock market investment strategy that uses a company's underlying financial condition as a guide for its future earnings prospects. Fundamental analysis assumes that a company's stock market price is a function of these future earnings forecasts, and so predictions for stock performance can be modeled.

Some of the greatest investors of all time subscribe to this model. Warren Buffet is perhaps the greatest example. His mentor was Benjamin Graham, who wrote some of these value investing bibles.

These investors believe that information can be gleaned from price to earnings ratios, debt ratios, and many other financial metrics. Like Technical Analysis, value investing involves heavy mathematics. Analysts model past earnings against a larger set of microeconomic variables to predict future stock market prices.

The proliferation of online trading applications and easy to use data modeling software has brought value investing to the masses. Arm yourself with knowledge and you might be able to invest online like the masters.

Technical Analysis for Online Stock Trading and Investment

Technical analysis is any online trading strategy that uses past prices to predict future stock market returns. You can check out these books on technical analysis, but here we will focus on some introductory technical analysis tools for online stock investment and trading.

In one of its simplest forms, the moving average convergence/divergence (MACD) indicator can be a powerful stock market strategy that uses technical analysis. A moving average is the average of a price over the last X units of time. For example, an online stock trading strategy might use a thirty minute moving average: the moving average at time T is the average of the last thirty minutes of prices. If we take the actual price at time T (which is not necessarily the same as the moving average at T) and subtract the moving average, we have the MACD.

Intuitively, this online trading strategy says that when the MACD gets to a large positive or negative value, the stock is likely overbought or oversold, respectively. So a large positive MACD might mean that stock XYZ is going to go down in price. Likewise, a large negative divergence might mean the stock is likely to rise.

There are an infinite number of online stock trading strategies that can rely on technical analysis because you are limited only by your imagination and knowledge of mathematics.