Technical Analysis vs. Fundamental Analysis

[Alpha_Bet]

So work it out yourself.
Like I did.

I have

[tech/a]

I have

End of conversation.

[sunnysyd]

Seems like this thread go slightly off topic and ended abruptly.

Fundamental or technical...the smartest way to trade is to stick to your strengths and delegate any weaknesses like one of the previous posts on page 13 (by notting) suggested. Good luck to all.

[Alpha_Bet]

End of conversation.

i acknowledge and accept our communication has come to an end.

the hair on the back of my neck bristles when someone takes the time to post something and says stuff all..........

so what is it we are all missing.......

i know you don't have the holy grail
nor do i

but don't come across as if you're holding the intangible

[chrislp]

I often hear this on this topic.

My personal view is that the quote above is simply another one of those true-isms accepted by the masses without much thought.

Shwagger who seems to be attributed as the source of the quote while an accepted Author failed as a futures trader.

Anyone care to enlighten me?

Really?

Your "mentor" is where I learnt my whole trading philosophy from.

[tech/a]

Really?

Your "mentor" is where I learnt my whole trading philosophy from.

Evidently it was on a personal level.
I haven't been able to find anything that verifies the information I received many years ago.
So I guess it should read ---- alegedly

[chrislp]

Evidently it was on a personal level.
I haven't been able to find anything that verifies the information I received many years ago.
So I guess it should read ---- alegedly

[tech/a]

Evidently it was on a personal level.
I haven't been able to find anything that verifies the information I received many years ago.
So I guess it should read ---- allegedly

Sorry now I'm with you. The link wasn't there before.


My suspicion remains.
I ware a number of different "Personality" hats at various times in the market.
If I wore the same hat and stuck to it I wouldn't trade different instruments and different time frames let alone Discretionary and Systematic.

So yes Really.---in my case.

[dutchie]

Even the government goes for Technical Analysis.

They are obsessed with TA.

[robusta]

Even the government goes for Technical Analysis.

They are obsessed with TA.

Do tell

[So_Cynical]

Back in October 2010 robusta issued the challenge.

http://www.aussiestockforums.com/for...?t=2694&page=7

Being a fundamental investor I miss out on many opportunities to make money open to technical investors.
A quick glance at the ASX Top 20 reveals 11 companies that will for one reason or another probably never be considered as investment candidates. (AMP, BXP, FGL, MQG, NCM, ORG, RIO, SUN, TLS, WDC, WPL).

Over the entire ASX I estimate only about 10% of companies tick enough of my boxes for me to consider them. I am sure a lot of investors have made a lot of money out of the above stocks.

From a technical point of view this creates a huge opportunity cost. At any given time there must be numerous stocks in the middle of a huge up-trend or hitting key resistance points.... you fill in the blanks.

As I have previously explained the technique I follow consists of identifying exceptional businesses, buying them for less than they are worth and holding those businesses until either they become significantly over valued or cease to be exceptional businesses.

I thought it may be interesting to list 6 businesses that meet my criteria and I think should out perform the market in the long term.
Disclosure 4 of these stocks are also in Roger Montgomery's Valeline portfolio.
These businesses are all about or below current intrinsic values.

If I assume a equally weighted portfolio and track it against the ASX 200 it should be interesting to see the results over the medium to long term.

It would also be interesting to get any input from any other points of view to see any correlation between different investment techniques. Or if anyone wants to put up a alternative portfolio?

CBA $50.50
CSL $32.50
JBH $19.59
MCE $4.95
FGE $4.05
FRI $1.40

Portfolio total $112.99 ASX 200 4694.90 20/10/2010

And i was the only one to respond.

Ok here is my 6 at today's close (i own stocks with *)

• BPT 0.615*
• CPU 9.71*
• TSI 0.665*
• PTM 4.75*
• CIF 1.15
• APN 1.95

Portfolio total $18.84 were gona include dividends in this?

For the first few months of the challenge my portfolio was up a little more than robusta's however that didnt last long and at the 8 month point robusta was from memory about 10% ahead of me.

On page 12 of this thread i rebalanced my portfolio due to TSI getting taken over, robusta didn't do any rebalancing.

OK so im happy to go with your dividends...mine added up to $1831 whole dollars, and my TSI money = $12706...sticking with the new entrant 10K theme ill plonk 10K into TOL -Toll Holdings @ $4.71 and put half the the rest into an average down in CPU @ 8.60 and the other half into APN @ $1.245...so.

• TOL $10000 = 2123 Shares @ 4.71
• CPU $2268 = 263 Shares @ 8.60
• APN $2268 = 1821 Shares @ 1.245

Anyway here we are 18 months from the original post and i though it would be interesting to see how the comparison of robusta's "value" portfolio was travelling against both my portfolio of discretionary "cheap high dividend" stocks and the ASX200

Looks like im way out in front of both robusta and the ASX200
~

[pixel]

A Technical Analyst and a Fundamental Analyst are chatting about the markets in the kitchen.

Accidentally one of them knocks a kitchen knife off the table, which lands right in the fundamental analyst’s foot!

The fundamental analyst yells at the technician, asking him why he didn’t catch the knife?

“You know Technicians don’t catch falling knives!” the technician responded.

He in turn asks the fundamental analyst why he didn’t move his foot out of the way?

The Fundamental analyst responds, “I didn’t think it could go that low”.

[wciszak]

Here is some nice skeptical discussion of the value and the pitfalls of technical analysis:
http://skepticaltradingstrategies.co...analysis-work/
I suppose, very similar arguments can be made with respect to fundamental analysis.

[TikoMike]

A Technical Analyst and a Fundamental Analyst are chatting about the markets in the kitchen.

Accidentally one of them knocks a kitchen knife off the table, which lands right in the fundamental analyst’s foot!

The fundamental analyst yells at the technician, asking him why he didn’t catch the knife?

“You know Technicians don’t catch falling knives!” the technician responded.

He in turn asks the fundamental analyst why he didn’t move his foot out of the way?

The Fundamental analyst responds, “I didn’t think it could go that low”.

It's funny how some people make fun of fundamental analysts with their 'witty' jokes when the actual joke itself shows that they don't understand how fundamental analysis works in the first place. Pretty ironic actually.

[Knobby22]

Bit of truth in the joke though.

All fundamental investors are tempted to catch falling knives, but it is very risky behaviour.
It pays to know a few basics that technical analysts use to reduce risk.

Fundamental investing works but it is hard. You are dealing with old information and can fall into traps set by a CEO wanting to make his bonus. The aim of the Fundamental investor is, like the technical guys, is to predict the future.

[Knobby22]

Bit of truth in the joke though.

All fundamental investors are tempted to catch falling knives, but it is very risky behaviour.
It pays to know a few basics that technical analysts use to reduce risk.

Fundamental investing works but it is hard. You are dealing with old information and can fall into traps set by a CEO wanting to make his bonus. The aim of the Fundamental investor is, like the technical guys, is to predict the future.

I'll give you a good example of a falling knife. Origin Energy dropped so I bought some. They look cheap to me. Worth heaps. but the dividend isn't that great and we have to wait 3 years before the gas is produced. Too long a time frame - so they drop. It is my only non performing share at present but it only takes one dud to reduce your earnings from great to average. I should have had a stop on it.

[DocK]

Bit of truth in the joke though.

All fundamental investors are tempted to catch falling knives, but it is very risky behaviour.
It pays to know a few basics that technical analysts use to reduce risk.

Fundamental investing works but it is hard. You are dealing with old information and can fall into traps set by a CEO wanting to make his bonus. The aim of the Fundamental investor is, like the technical guys, is to predict the future.

I disagree with the part I've bolded. To me, technical analysis means not making an attempt to predict the future, but placing oneself in a position to either benefit from a trend or be stopped out at a small loss should the trend falter. I think Tech was fond of saying the money was made from the math, not whether your predictions were right or wrong - and this sums up my understanding of technical analysis - hop on a trend and ride it, and get out fast if it fails. The profit comes (hopefully) from the amount made on winning trades outweighing the amount lost on the losers. Trying to predict what may happen in a year's time is hard enough these days, let alone trying to predict where the market/economy/world will look like 5 - 10 years from now.

[Knobby22]

I disagree with the part I've bolded. To me, technical analysis means not making an attempt to predict the future, but placing oneself in a position to either benefit from a trend or be stopped out at a small loss should the trend falter. I think Tech was fond of saying the money was made from the math, not whether your predictions were right or wrong - and this sums up my understanding of technical analysis - hop on a trend and ride it, and get out fast if it fails. The profit comes (hopefully) from the amount made on winning trades outweighing the amount lost on the losers. Trying to predict what may happen in a year's time is hard enough these days, let alone trying to predict where the market/economy/world will look like 5 - 10 years from now.

Yes and No. I know where you are coming from.

Obviously if you don't care about fundamentals you are not trying to predict where its going. however you are trying to predict a percentage of winning trades.

You are trying to predict where the share price is going and relying on it to change substantially.

You are using semi -proven human behaviour patterns to predict in which direction the share/market changes.

Sure, you are using capital management so you don't have to be right all that often.

You need positive expectancy to make money. You need an edge.

That's why you test the theories before implementing them. You can't tell me that all people who try to use technical analysis do well. There are many who lose, just as occurs (probably even more so) in fundamental investing.

[jancha]

Sorry if it's come up somewhere before but whats wrong in taking both sides here. Rather than Analysis vs Fundamentals why cant the two work together as a tool to buy shares? Does it have to be black and white?
I tend to look at both when buying a share. Even as an example with RED the Tech analysis won out over the fundamentals here but even so i dont think i would be in the black with that particular share if it weren't for the technical charts of the the share. Unless fundamental means long term i dont see any reason for the two work as one.

[TikoMike]

You see the problem with TAs when they criticise FAs is that they think that all FAs are uniform in their investments. Proper FAs don't simply chuck their money into any type of company like TAs seem to think. For example I would never invest in airlines.

They don't all try and catch falling knives either. Some FAs may just simply follow the Mr Market way of thinking made so famous by Buffett. Because it does happen. How else would have a great company like Domino's been valued at $2 for so bloody long?

You hear stories of "Oh I tried the buy and hold strategy a long time ago and I lost money. I used to be a fundamental investor". My reply to that is you bought and held the wrong company and/or most likely at the wrong time or that you relied to heavy on "professional" advice or the herd's advice.