Fundamental vs Technical Analysis — Which Is Better for Malaysian Investors? | Maher Saham

In the world of stocks, investors often find themselves confused between fundamental analysis vs technical analysis. Both are important, but their purposes and approaches are quite different.

Two Worlds: Fundamental vs Technical

Fundamental analysis (FA) focuses on evaluating a company's intrinsic value by studying its financial statements, earnings reports, revenue growth, and key ratios such as ROE, PE ratio, and dividend yield. The goal is to determine whether a stock is undervalued or overvalued relative to its true worth.

Technical analysis (TA), on the other hand, studies price movements and chart patterns to identify optimal entry and exit points. Technical analysts use tools such as candlestick patterns, moving averages, support and resistance levels, and volume indicators to predict future price direction.

1. When the Price Falls

A fundamental analyst would view a price drop as a potential buying opportunity — provided the company's financials remain strong. If the earnings are consistent, the balance sheet is healthy, and the business model is sound, a lower price simply means better value.

A technical analyst, however, would likely see the same price drop as a bearish signal. If the stock breaks below a key support level or shows a bearish candlestick pattern, a technical trader would cut losses according to their trading plan rather than hold on.

2. When the Price Rises

From a fundamental perspective, a rising stock price that has exceeded its fair value may signal it is time to take profit. No matter how strong the uptrend, fundamentalists focus on whether the stock is still trading below its intrinsic value.

For technical analysts, a rising price accompanied by strong volume and bullish chart patterns is a signal to ride the trend. They would hold the position as long as the trend remains intact, using trailing stops or momentum indicators to time their exit.

More Similarities and Differences

Despite their differing approaches, fundamental and technical analysis share a common goal: to help investors make profitable decisions in the stock market.

Aspect	Fundamental Analysis (FA)	Technical Analysis (TA)
Focus	Company value & financials	Price action & chart patterns
Time Horizon	Medium to long-term	Short to medium-term
Key Tools	Financial statements, PE ratio, ROE, dividends	Candlestick charts, moving averages, volume
When to Buy	When stock is undervalued	When chart signals a bullish entry
When to Sell	When stock exceeds fair value	When chart signals bearish reversal
Best Suited For	Long-term investors	Short-term traders & swing traders

Combining FA and TA

Many successful investors in Bursa Malaysia use a combination of both fundamental and technical analysis. The strategy is straightforward:

Use fundamental analysis to select quality companies — Look for stocks with strong earnings, low debt, consistent dividends, and good management.
Use technical analysis to time your entry — Once you have identified a fundamentally strong stock, wait for technical signals such as a breakout above resistance, a bullish candlestick pattern, or a pullback to a support level before buying.
Use technical analysis to manage your exit — Set stop-loss levels, trailing stops, or use momentum indicators to protect your profits and minimise losses.

This combined approach gives you the best of both worlds: the confidence of owning a quality company and the precision of entering at the right time.

Conclusion

Neither fundamental nor technical analysis is inherently better than the other. Each serves a different purpose and is suited to different investment styles. Fundamental analysis helps you understand what to buy, while technical analysis helps you determine when to buy.

For Malaysian investors, especially those investing in Bursa Malaysia, learning both approaches will significantly improve your decision-making process and help you build a more robust investment portfolio.

Frequently Asked Questions (FAQ)

What is the main difference between fundamental and technical analysis?

Fundamental analysis evaluates a company's true value through financial reports, earnings, and ROE, whereas technical analysis studies price movements and chart patterns to determine entry and exit points. Fundamental analysis is more suited for long-term investing, while technical analysis is better for short-term trading.

Can you combine both fundamental and technical analysis?

Yes, and it is highly encouraged. Fundamental analysis helps you select strong companies, while technical analysis helps determine the best time to buy. Combining both reduces risk and maximises returns.

Which analysis method is more suitable for beginner investors in Bursa Malaysia?

Beginner investors are encouraged to start with fundamental analysis as it builds an understanding of a company's financial health. Once proficient, add technical analysis to determine more precise buying timing.

What should you do when a stock price falls — cut loss or average down?

It depends on your analysis. If the company's fundamentals remain strong and you have planned capital for averaging down, it can be a viable option. If you are trading based on technical analysis, adhere to the cut-loss price set in your trading plan.

Understanding the difference between fundamental and technical analysis is a crucial step in building an effective investment strategy — and both can be learnt progressively.

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