Because it is a dynamic, unpredictable financial force, the stock market can be very intimidating for some people. Although it presents unprecedented opportunities for growing your money at a very quick pace, the stock market also involves an element of risk for every trade that is made. Many people can't handle the thought of losing their money because of misinformation or bad timing, so they keep it safe in high yield savings accounts or certificates of deposit where it is protected, but also earning far less. If you're going to be successful in the stock market, it helps to know where the market is headed, and that means you're going to have to learn more about market analysis.

Many new investors will hear a term like market analysis and assume that it is a complicated process that's better left up to their stock broker or financial advisor, but the truth is that the basic principles of analysis are simple to comprehend, and all investors should be aware of how they work, even if they're not sole responsible for putting them into action. There are two main ways that investors can evaluate the market for the best opportunities to buy or sell shares, technical analysis and fundamental analysis.

The most popular type of market analysis for short term trading is technical analysis, as it allows investors to make reliable predictions about whether a stock's price is likely to increase or decrease in the near future. Technical analysis is based on three main assumptions: the market is able to adjust for qualitative influences like public demand, financial stability, and company history on its own; the market is inclined to move in trends and will continue to do so until an outside force moves to end them; and history is destined to repeat itself in the form of market trends and patterns. Using these assumptions, technical analysts use patterns from the past to predict how trends will end up in the future.

The second type of market analysis is fundamental analysis, which is more popular among long term traders and those that are invested in commodities. These traders are interested in value of stocks over time, and spend much of their analysis looking at the qualitative factors mentioned previously to help them determine whether a stock will be a successful investment over long periods of time. In most cases, successful investors will use a combination of both methods to form their investment strategy.