You know that stock analysis makes or breaks your success rate as an investor. But there are so many different forms of analysis. It’s easy to get overwhelmed trying to interpret too much data. That’s where analysis paralysis comes into play.

Today, we’re going to help you figure out if you should put more stock in quantitative analysis vs technical analysis. This will help you focus your attention (and learning) on just one thing at a time.

The VectorVest stock analysis software applies quantitative methods across more than 16,000 stocks daily, whittling down complicated technical indicators and convoluted fundamental data into three simple ratings.

Better yet, you get a buy, sell, or hold recommendation for any given stock at any given time, taking all the guesswork out of your decision-making. Learn more below.

Key Takeaways

  • Technical analysts look at price and volume charts to predict future stock movement.
  • Quantitative analysts evaluate stocks using mathematical models and broad financial data.
  • Technical analysis is visual and interpretive, whereas quantitative analysis is systematic and data-driven.
  • Fundamental analysis overlaps with technical and quantitative analysis as well.
  • VectorVest’s stock advisory saves you time and stress while empowering you to win more trades with less work.

What is Technical Analysis?

This approach to analyzing stocks looks closely at price movement and trading volume to get an idea of what a stock might do next. It’s a pretty simple philosophy: everything that could possibly affect a stock’s price is already reflected in the chart, be it earnings data or market sentiment. It’s as straightforward as reading what the chart tells you and acting accordingly.

You’ll rely on a variety of stock indicators to conduct technical analysis. The most common include moving averages, relative strength index (RSI), and support/resistance levels. These help you identify potential breakouts or reversals. Candlestick patterns show you when buying or selling pressure is shifting. Volume confirms whether a trend is legit or not.

You can adapt technical analysis to fit your trading strategy by playing with the timeframe. For example, day traders mostly use 1-minute charts. Swing traders work off of daily or weekly charts.

One key point is that those who practice technical analysis mostly don’t care about the fundamentals behind a stock, such as earnings information or even what the company actually does. It’s all about price action.

We get asked all the time, does technical analysis work? Yes, but it’s not without its limitations. It’s time-consuming, first and foremost. But perhaps more importantly, it doesn’t tell you everything. It’s prone to conflicting signals from different indicators, too.

What is Quantitative Analysis?

Quantitative analysis doesn’t involve charts. Instead, analysts feed financial data into a mathematical formula. That includes earnings history, revenue growth, debt ratios, and even macroeconomic indicators. A score comes out the other end.

This is something Wall Street has been doing for decades. Renaissance Technologies, arguably the most successful hedge fund in history, runs pretty much entirely on quantitative analysis. It takes all the guesswork, emotion, and human error out of play.

You’ve actually run your own version of quantitative analysis without even knowing it if you filtered stocks by P/E ratio or earnings yield in a stock screener. That’s technically quantitative analysis at a very simple level.

This is the type of analysis we preach here at VectorVest, and it’s the entire philosophy behind our VST system. This proprietary stock rating algorithm rates stocks based on three criteria:

  • Relative value: Compares a stock’s 3-year price projection, AAA corporate bond rates, and risk.
  • Relative safety: Gauges a company’s financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, and other factors.
  • Relative timing: Based on the direction, dynamics, and magnitude of a stock’s price movement. It’s calculated day over day, week over week, quarter over quarter, and year over year.

Each sits on an intuitive scale of 0.00-2.00 with 1.00 being the average. Together, they form the stock’s overall VST rating – and dictate whether it’s rated a buy, sell, or hold.

Quantitative Analysis vs Technical Analysis: Key Differences Investors Need to Know

You can already start to appreciate just how different quantitative analysis vs technical analysis are. Here’s a closer look at where they diverge from one another:

  • Data inputs: Technical analysis really just takes price and volume into account. On the other hand, quantitative analysis pulls from far broader sources to paint a more complete picture of what’s going on with a stock – financial statements, analyst forecasts, interest rates, sector-level trends, and more.
  • Objectivity: Technical analysis requires some interpretation. Two investors can arrive at very different conclusions based on the same chart. In contrast, quantitative analysis will always give you the same outcome based on the same inputs, no matter who runs it.
  • Skill set: Technical analysis takes a lot of visual pattern recognition and market intuition. It comes from experience. Quantitative analysis just requires you to be comfortable with statistics, and if you’re building your own model, programming.

At the end of the day neither is necessarily “better” across the board in looking at quantitative analysis vs technical analysis. They’re just two different philosophies, and it comes down to which you feel tells you more about a stock – and which better aligns with how you like to analyze opportunities.

How Does Fundamental Analysis Come Into Play?

Fundamental analysis is a third approach that you should be aware of. Especially considering how much it plays into quantitative analysis.

Fundamental analysts really just try and answer one question: how much is a company actually worth? In order to do that, they will dig into financial reports, market sentiment, and sector-specific insights.

Quantitative analysis will pull earnings and revenue data, for example, to feed its models. That’s exactly what the RV and RS ratings within the VectorVest VST system do.

Simplify Stock Analysis With VectorVest

Whether you’re hunting down the best stocks for beginners with little money or the best gold stocks and silver stocks to buy, VectorVest can help you uncover winning opportunities on autopilot – and actually interpret them without any emotion or bias!

The VST system literally tells you what to buy, when to buy it, and when to sell it. But VectorVest also gives you a wealth of trade ideas on a daily basis with pre-curated screeners that you can filter to surface whatever types of stocks you’re looking to invest in.

The system has outperformed the S&P 500 by 10x over 22 years, all while cluing investors into major market moves before they happened – from the Dot Com peak in March 2000 to the COVID bottom in March 2020.

You don’t have to struggle to interpret complex technical indicators or figure out how to build your own quant models. Get a free stock analysis today and see how VectorVest rates any stock on your watchlist.

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