Technical or Fundamental?
In college all of the professors preached that technical analysis is rubbish, but out of college I see a lot of people swearing by it. I realize both have their place. What’s your opinion?
@Raysor should get his nose out of his assets. Technical analysis when done properly is anything but rubbish.
You might think that I am 100% technical and up to 2 years ago I would have said you were correct about me by saying that. It was all I used before that time and I did quite well at it…still do.
You will see that I start any analysis here with a brief discussion of balance sheets and income statements…I am not an expert on analyzing these documents but this Fundamental look at debt and net income has saved me from making bad picks simply because the charts looked good. I refuse to invest money in companies who don’t make money or don’t at least seem to be crawling out of the red …if the reverse is true …. bad debt load and lowered revenues….I stop my analysis right there and move on.
You will also see me tear into the operation of a company…especially mining and O&G companies where scams and picture painting are obvious to me anyway. Following their operation reveal obvious red flags to me so scam companies can be found.
So do I believe Fundamental Analysis is useful…..certainly…wish I understood it more. But for me…it is a starting point….not the decision maker to buy a stock or sell….why? because it is difficult to get current HARD fundamental data. Financial reports by the time they become public are 4 MONTH OLD. Most media news is garbage pumping.
IF you are a day trader….fundamental analysis is basically useless to you. Anything can happen in one day. Relying on Buzz for “action” stocks makes sense where it is foolhardy to believe this “news” as a swing or long term investor.
If as a day trader,
you do not learn basic technical analysis using Bollinger Bands, MACD, RSI, Moving averages and volume…you will:
1) Will not be successful in the long haul as you will usually buy too late (or near the top) and sell too early…accepting a small gain when there was more to be had.
2) You will be trading scared…you have no idea what will happen next. You will constantly ask fellow daytraders for advice, most of which are trading just as scared as you.
I would venture to say that a really successful daytrader relies on Technical analysis and has REALLY studied the patterns using the indicators I mentioned earlier.
As a long term trader
Fundamentals will select a candidate….Technical Analysis will suggest when to buy/sell.
There are many styles of Technical analysis. They are not all the same and in practice some people follow a book description of an indicator or two and then throw up their hands when they are mislead. That is because they are looking for a “magic” bullet…and there is none.
They also do no study on their own, they don’t work out their method of using charting. Some books are great…parts of them anyway but if you read books on charting they mention the good parts and often as not spout nonsense as the author wants it to be a complete system. For example, Candlesticks are very useful chart for daytraders but less useful for long term as they always refer to changes in the last 3 candles…and then couch their prediction with a caution to look for confirmation elsewhere…Do I use Candlesticks for long term analysis…certainly!!! You see them in the charts I show to look for the “micro” look at resistance/support that might last a few days or even minutes when if I am planningt to squeeze a few pennies out of stock when buying or selling.
Technical analysis will help you
1. predict timing of an entry or exit position (rising from a support or just below a resistance to catch a spike in price before it falls.
2. estimate when a stock will run into problem resistances or saving of a support (P&F)
3. It can predict the beginning of a swing run or a short ….and it can predict the end of the run and bottom of a short …at least the way I figured out how to do it.
4. When approaching a resistance or support it can predict if it will break through or not.
No two situations are the same and there is a lot of art to it….about 50/50 art and science…you must draw a consensus in my opinion as individually EVERY indicator will fool you at one time or another…but a consensus of six will usually be on the mark.
Is TA perfect?…nopes…Is my way the only TA way?? nopes again I do constantly search and evaluate many TA aspects. Is it better than guessing? No question about that…
Stock Market Prediction For Trading Week of February 3 2014