Market processes need to be examined in order to forecast the future movements in the market prices of different shares. Generally, there are two methods to do so.
Technical analysis explores the underlying principles of the movements on the market. The analyst does not need to know anything about the firm which issued the shares. The analysis forecasts the changes and developments in the market prices built exclusively on the following factors: change in the market prices, trading intensity (increasing or decreasing), other calculated indicators, and the behaviour of other participants on the market. The predictions are based on the different aspects of market price charts. They can be used for short-, medium-, and long-term trading.
Fundamental analysis examines the cause of the behaviour of the market. It attempts to forecast the changes in the share prices based on the following factors: the economic indicators of the given company, the assumed future success of its products, the assumed expertise of its management, and the political (or other) environment influencing the firm’s operations. This type of analysis is primarily used for long-term investments with maturity of several years. For short-term investments (such as day trading) only the current effect of changes in factors determining the value of the firm can be used (e.g. quarterly reports, other news).