What Is Fundamental Analysis?

Fundamental analysis is all about the company behind the stock. It looks at the real-world performance of the business.

Key things it considers:

• Earnings reports – How much profit the company is making
• Revenue growth – Are sales increasing over time?
• Debt levels – How much money does the company owe?
• Dividends – Is the company paying out returns to investors?
• Economic conditions – What’s going on in the broader UK economy?

With this method, you study the company like you would before starting a partnership. You try to understand its strengths, weaknesses, and future outlook.

Example

Imagine you’re thinking about investing in Tesco. You would look at how much profit they made last year, whether they’re gaining or losing market share, and what their plans are.

What Is Technical Analysis?

Technical analysis is not particularly concerned with a company’s sales or profits. It focuses only on the stock’s price movements.

Key things it focuses on:

• Price charts – How the stock has moved over time
• Trading volume – How much of the stock is being bought and sold
• Trends and patterns – Are prices rising, falling, or moving sideways?
• Support and resistance levels – Key points where prices might change direction

This method is like studying crowd behaviour. You try to guess where other investors are going and follow the flow.

Example

Say you’re looking at BP’s stock. The chart shows the price has bounced off £4.50 several times. A technical analyst might buy the stock if it nears that level again, expecting another rise.

How They Differ

Let’s break it down simply:

FeatureFundamental AnalysisTechnical Analysis

Focus on Company performance, Stock price patterns

Timeframe: Long term, Short term, and medium term

Tools used: Financial statements, economic data, Charts, indicators

Goal: Find undervalued companies, and predict price movements

They work on opposite ideas. One looks inside the business. The other watches how the stock behaves.

Which One Should You Use?

The answer depends on your goals.

Use fundamental analysis if you:

• Want to invest for the long term
• Care about the value and stability of a company
• Want to build a portfolio that grows over the years

Use technical analysis if you:

• Prefer short-term trading
• Like spotting trends and quick entries/exits
• Want to avoid reading long financial reports

Can You Use Both Together?

Yes, and many investors do. Some use fundamental analysis to pick good stocks. They then use technical analysis to determine when to buy or sell.

For example:

• You might research Lloyds Bank using fundamentals and find it’s undervalued.
• Then use technical charts to decide when it’s the right time to enter the market.

This approach helps you avoid overpaying and time your trades better.

Why This Matters for UK Investors

The UK stock market is home to prominent companies such as Barclays, Unilever, and Shell. But it also has many smaller companies.

• FTSE 100 – Great for fundamental investors who want stable, large firms
• FTSE 250 – Offers growth opportunities for both types of analysts
• AIM stocks – These are riskier but attract technical traders due to fast price moves

Understanding both methods can help you develop a more effective and flexible investment style.

Common Tools for UK Investors

For fundamental analysis:

• Company annual reports (check the investor section on company websites)
• Financial news (BBC Business, Financial Times)
• Ratios like P/E, ROE, and Debt-to-Equity

For technical analysis:

• Trading platforms like IG or TradingView
• Indicators such as RSI, MACD, and moving averages
• Candlestick charts to spot entry and exit signals

Mistakes to Avoid

Whether you choose one method or both, avoid these errors:

• Ignoring your risk level – Don’t just follow others
• Using too many indicators – This can confuse you
• Chasing hype – Always do your analysis
• Being too emotional – Use logic, not fear or greed
• Lack of patience – Analysis takes time and discipline

Reviewing Your Strategy

No method is perfect. Markets change. Your plan should too.

Review your portfolio every few months. Look at:

• How are your stocks performing
• If your analysis was correct
• Whether it’s time to take a profit or cut losses

Over time, you’ll learn which method suits you better.

Final Thoughts

Both fundamental and technical analysis are helpful in their way. One gives you a deeper understanding of the company. The other helps with timing.

There’s no right or wrong way to invest—just the way that works for you. Try both. Learn over time. And remember, even the best investors never stop learning.
If you’re ready to explore more or join live sessions that teach both methods, click here to book your spot.