Graphical analysis allows you to concentrate all the data and make predictions
With this type of stock analysis, investors get information on a different basis. “You look at price action and stock turnover in the past and try to estimate the near future based on past development,” Levene explains. The analysis focuses on the question of whether the course is following any patterns or trend reversals. The results are presented graphically, for example, histograms or Candles (candle charts).
From the development of such formations, analysts deduce whether the price of a stock will tend to rise or fall when it reaches a certain level in the future. “Sometimes the prediction does come true,” Levene says.
Whether it's fundamental analysis or technical analysis, which option is best for successfully assessing a stock's earnings outlook is debatable among experts. One thing is certain: both forms of analysis have their drawbacks.
One of the arguments against fundamental analysis is that the key figures around which everything revolves can become outdated in a very short time.
The weakness of graphical analysis is that analysts view securities in isolation over a period of time rather than in relation to other securities.
Important: What has proven itself in the past in terms of stock analysis is no guarantee that it will also succeed in the future.
"You often use both methods and combine the information you get." "That's why it's especially important for every investor to spread their assets across multiple stocks, eight to ten different ones," Leven emphasizes. “This protects against excessive losses if you miss even one share.”