Fundamental analysis refers to understanding the financial aspects that can affect the overall price of the stock of a particular company. Investors use various strategies and aspects to carefully select a particular stock for investment. Fundamental analysis is one such system that involves understanding various internal aspects related to a company like earnings per share, profitability, and performance. Companies with strong fundamentals are considered less risky in terms of investment in the long run. Intraday trading as a concept and way of trading on the stock market involves making use of small price fluctuations for earning profits. There are various available strategies that traders make use of in intraday trading. However, fundamental analysis for intraday trading may prove to be less beneficial as compared to other strategies available. The reasons are as follows:
Intraday trading involves earning profits through an understanding of fluctuations in the price of a stock on a single day. Conducting fundamental analysis that includes checking and analysing the performance of a company based on various factors like earnings and profits may not help with intraday trading. Prices on a single day tend to go upward and even downward depending upon the various factors apart from the performance of a company. This means conducting the fundamental analysis may not be a proper strategy in the short run for intraday trading.
Profits in the short run:
The fundamental analysis becomes beneficial in the long run. Understanding the fundamental aspects related to a business can help with long-term investment in a particular stock. Intraday trading involves investment in the short run to earn profits immediately on the same day. Therefore, fundamental analysis may help long term investors but not short-term intraday traders.
Difference in approach:
Fundamental analysis for intraday trading may not prove beneficial due to differences in their approaches to earning profits and investment. Intraday trading involves rigorous chart analysis, an understanding of price fluctuations, and a candlestick approach to investment and trading. Fundamental analysis focuses on the financial condition of a company that further affects its stock price. Therefore, intraday trading may not be benefitted much from the fundamental analysis as well.
Various intraday hedging strategies are available that one can opt for in the place of fundamental analysis. Though analysing a company based on its performance can benefit a trader and investor in the long run but not for intraday trading. Fundamental analysis is essential for selecting a particular company and stock that may be fruitful both for long and short-term investment. Technical analysis is given more preference as compared to fundamental analysis for intraday trading. One must understand the working of stock market indices, price fluctuations, and even candlestick technical analyses that are considered perfect for intraday trading. Intraday trading involves understanding various aspects that must be carefully analysed before indulging in the same. Fundamental analysis can help with the picking of a particular stock but the decision to buy and sell on the same day cannot be based upon the performance of a company.