Fundamental vs. Technical

[Captain_Chaza]

"Fundamental v Technical "

I wrote this article nearly a decade ago
I can't see that anything has changed since

“No man can serve two masters,” wrote Saint Matthew.

There are two basic approaches for deciding the future direction a sailing ship of any size and design might move.

The fundamentalist approach is faced with a massive information-gathering problem. Every fact relevant to the craft must be known and weighted according to its importance and its price equation. The skipper here assumes his own interpretations and his known facts are better than average.

He will analyze all the facets of world politics and its effects on the global economic community on a regular basis. He will study each member of the global exchange from currencies and interest rates to commodities and raw materials, to the latest developments in design technologies in the multitude areas of human activity.

He then turns his head to the economic statistics price/earning ratios, dividend yields, company reports on as many ships as he can mentally digest and consume as much written matter time allows. This is truly an awesome task for any skipper even those with a crew of skilled academics on each floor of a high-rise office building.

Unfortunately for the fundamentalist by the time he receives most of his information and statistics it is hopelessly out of date. By the time he evaluates and mixes up his recipe for a rational decision the moon has moved the tides. He often complains he is living in an irrational world and that the world has just gone temporally mad. Naturally, “She’ll be right in the long term,” he always says.

How often does a ship move in the opposite direction immediately after a good or bad report? Since information is never leaked in this fairest of all sports with its strong rules of fair disclosure, he will often claim an event has already been factored into the equation by the gamblers. How often does he cling to the skimpiest of fundamental good news as the price descends deeper and deeper south?

Because this has happened so often in the past it has even turned some fundamentalist heads inside out and they have developed a reverse fundamental approach.

This down-under, upside-down fundamentalist or contrarian viewpoint has surprising much to offer. Here the skipper has acknowledged the fact that punching the latest fundamentals into his computer will result in garbage.

He has accepted the fact that everything has been leaked and that it is not a fair game at all, but All-Out War.

Also, in view of his past experiences he has decided that he hasn’t been as close to the good information chain link as he would have liked and refuses to be fair game in the future.

The Technical believes that no fundamental fact whatsoever matters unless the masses have this shared psychology and provides the only mechanism to measure this irrational and emotional component.

Any experienced campaigner knows and the novice will soon discover how deeply the counter productive aspects of tension, anticipation and anxiety alter the way a skipper sails the seas. Usually directly proportional to the funds committed.


The technical believes the oceans are extremely efficient with its global sharing of information and regularly observes the actions of others, not their talk.

The technical can put objectivity at the helm and control the nemesis of all sailors at sea on the Global Exchange namely, emotion and rationale. They provide the mechanism to set entry and exit points, set risk/reward ratios and even foster a safety and risk management approach to sailing in all types of sea and weather conditions.

Technical allows the skipper to step back and gain a better insight and perspective of the Global Exchange and carry out numerous ship surveys. A chart is worth more than a thousand words.


The technical viewpoint encompasses every participant’s knowledge and beliefs about the future direction a craft may head next. It takes into account all the known facts as well as the human interpretation of those facts. More importantly it also takes into account fundamental news not yet known to the general public and is right up to date.



Finally, the fundamental academic with the I know all attitude who has ridiculed and under estimated his technical opponent for so many years, now believes he has room on board for some technical.


Unfortunately, as more and more skippers sail on technical, more ships are now moving accordingly, there is no room onboard for any fundamentalist with his long term excuse and his minuscule amount of up to date facts. He is in fact a most dangerous dinosaur to have onboard. He must be avoided at all costs and only regarded as fair game. Whether he is a bull or a bear he cannot change his spots and will always cloud a skipper’s judgment and coarse many costly delays.

Sailing in this modern era is All about the

Technical verses Technical.

[wabbit]

FA and TA are tools; useful tools to have in your toolbox. The knowlegable trader/investor chooses the right time to use each tool.

“No man can serve two masters,” wrote Saint Matthew.

TA and FA are not masters...
I like to think of it more simply...

"If the only tool you have is a hammer, eventually everything looks like a nail!" wrote I.


wabbit

[tech/a]

Technical OR Fundamental,doesnt matter.

How its applied (either) however does.
Many Technical writers have attempted to trade and failed dismally... Shwagger was one I know of.
Many Fundamental analysts make recommendations that fail.

Analysis without application is like a ship full of academics who have studied sailing for years but have never sailed a ship.

[motorway]

Analysis without application

Application is something that can be constantly improved
The principles upon which correct analysis is built from

can only be (re) discovered . and kept at the centre..

Once principle is lost... We have better and better applications of
dubious value.. The splitting of hairs..

Fundamental or technical

In the end what matters matters
what doesn't is immaterial

I would not go as far to say that ALL Fundamental consideration is Void


It is the monkeys Vs Shakespeare

If We have some inkling that We might have a Shakespeare

It certainly narrows the credible universe
of possibilities and Helps separates noise from signal

motorway

[Knobby22]

It is the fundamentals that move the market long term.

3 points

It is true there are an ocean of facts and the fundamentalist cannot hope to keep abreast of them all however.. if he studies only a few companies, preferably small companies that are overlooked by the big boys, often illiquid companies, and understands them to a high level and the industry the company works in, then he can beat technical analysis for that company.

Secondly, good fundamnetal analysis does not consist of typing historical facts into a computer, it is to predict the future. In fact, if you develop the skill of analysing fundamentally then you will know when the company is doing something wrong and be selling into the technical traders.

Finally, most good fundamental traders are still aware of unusual market movements and will sell or buy if they are suspicious. They in other words ise a small amount of technical analysis in their armoury.

Tech/a is right, there are many fundamnetal and technical traders that do not make money. It is a reflection of their application rather than the general method.

[Knobby22]

Another point. A technical trader cannot risk more than a certain percentage of their capital. A good fundamental trader might risk 50%! This is because he is confident and when the price triples he can get wealthy.

[Captain_Chaza]

I would be happy to take on You or/and any Fundanentalist in a race of any kind

Time frames and rules to be agreed by both sides

Salute and Gods' speed

[BSD]

Sounds great Chaza

No more need to study anything beyond graphs and patterns

Does this amazing insight extend to predictions of weather patterns, agricultural yields, commodities prices and grand final winners?

Why bother studying anything when we can do it all with graphs?

Sack the analysts and instos - they produce nothing that a bunch of 22 y/o Commsec punters couldnt beat dealing in Uranium shares.

Of course - some investors need to swing a bigger line than $50K

Name 5 Technical Analysis based funds dealing on the ASX bigger than $1bn

Maybe there is an amazing opportunity for you?

Providing some statistics rather than b*llsh!t seafaring analogies may help your cause

[motorway]

It is the fundamentals that move the market long term.

3 points

It is true there are an ocean of facts and the fundamentalist cannot hope to keep abreast of them all however.. if he studies only a few companies, preferably small companies that are overlooked by the big boys, often illiquid companies, and understands them to a high level and the industry the company works in, then he can beat technical analysis for that company.

Secondly, good fundamnetal analysis does not consist of typing historical facts into a computer, it is to predict the future. In fact, if you develop the skill of analysing fundamentally then you will know when the company is doing something wrong and be selling into the technical traders.

Finally, most good fundamental traders are still aware of unusual market movements and will sell or buy if they are suspicious. They in other words ise a small amount of technical analysis in their armoury.

Tech/a is right, there are many fundamnetal and technical traders that do not make money. It is a reflection of their application rather than the general method.

And If We scan the whole market and can recognise accumulation when We see it.. Then We can benefit from that accurate Fundamental analysis that the few can do in the even fewer number of companies that they can keep abreast of..

We maybe have every insider and every fundamentalist working for Us
Even though they don't mean to..

What ever they "know" and whatever their intention..
When they act when they first accumulate to speculate
When they Buy or Sell... The action and subsequent action of the particular stock reveals their purpose..

A nod is as good as a wink

Accumulation----> markup----->Distribution------>Markdown..

Each has it's footprint...



motorway

[Knobby22]

I don't need to prove anything Chaza.

As you are a new person to this board I will be interested in your analysis and after a year, if I respect you, then we may cross swords, so to speak.

Good comments BSD.

[Knobby22]

And If We scan the whole market and can recognise accumulation when We see it.. Then We can benefit from that accurate Fundamental analysis that the few can do in the even fewer number of companies that they can keep abreast of..

We maybe have every insider and every fundamentalist working for Us
Even though they don't mean to..

What ever they "know" and whatever their intention..
When they act when they first accumulate to speculate
When they Buy or Sell... The action and subsequent action of the particular stock reveals their purpose..

A nod is as good as a wink

Accumulation----> markup----->Distribution------>Markdown..

Each has it's footprint...



motorway

True motorway, as long as there is liquidity and as long as they are not being sucker punched (i.e. pumped and dumped). But I know a good technical operator with lots of time do succeed and I respect them for it.

[wayneL]

Sounds great Chaza

No more need to study anything beyond graphs and patterns

Does this amazing insight extend to predictions of weather patterns, agricultural yields, commodities prices and grand final winners?

Why bother studying anything when we can do it all with graphs?

Sack the analysts and instos - they produce nothing that a bunch of 22 y/o Commsec punters couldnt beat dealing in Uranium shares.

Of course - some investors need to swing a bigger line than $50K

Name 5 Technical Analysis based funds dealing on the ASX bigger than $1bn

Maybe there is an amazing opportunity for you?

Providing some statistics rather than b*llsh!t seafaring analogies may help your cause

I think essentially there are crossed purposes here.

Funds > 1bill MAKE the chart. It is a completely different kettle of fish than TRADING a chart.

Trading a chart relies on not moving the market with your trades.

The funds are like the infantry of old, moving in great lines, red jackets, bagpipes playing, all stiff and proper. They move in fronts and create the battleground.

We technicians are the guerrilla fighters of the market, sneaking around, unseen (hopefully), faces blackened, bayonet between our teeth, involved in sneak attacks on skirmishes on the flanks.

(or somewhere between the two)

If we get too big, we must become an infantry and joins BSD's lot. But with capital of 500,000 or less (a great deal more on the US exchanges) we can lurk around and raid the market at will.

I can tell you the skilled guerrilla will outperform the infantry on a risk adjusted basis by a substantial degree. There is nothing wrong with either method of warfare, it just depends on resources and skills available.

Bagging each other is infantile, silly.

Cheers

[rederob]

I would be happy to take on You or/and any Fundanentalist in a race of any kind

Time frames and rules to be agreed by both sides

Salute and Gods' speed

Charlie
You haven't stopped being a right wally!

[BSD]

If we get too big, we must become an infantry and joins BSD's lot. But with capital of 500,000 or less (a great deal more on the US exchanges) we can lurk around and raid the market at will.

I can tell you the skilled guerrilla will outperform the infantry on a risk adjusted basis by a substantial degree. There is nothing wrong with either method of warfare, it just depends on resources and skills available.

Bagging each other is infantile, silly.

Cheers

Cannot disagree with most of this

I remain happy to leave running across minefields to the chartists - it is great for liquidity

Nothing wrong with getting too big though

[Captain_Chaza]

Thankyou for the Warm Welcome Officer Rederob

As you know I am very new to this Forum and just trying out a few ropes and getting to know my way around

First impressions have always been important to me!
As you know!

Crikey! I get the feeling that some Landlubbers are already getting sea-sick

Let's Wait 'til I give them my very best, Hey?
(As time permits)

"Planning a Cruise"
"Seamanship"
"Rough Sea and Gale"
and
"Storm at Sea"

Salute and Gods' speed

[rederob]

Charlie
You probably got "chucked" from the other forum, and need somewhere to ply your craft.
If you run true to form you won't last long here.
This forum is a much broader church than IC, and also a little more vigilantly "moderated".
It will be edifying to see if you reveal more than your usual bluster at this site, given that you have been so prone to "exclusivity" elsewhere.
As you noted, first impressions are important: You chose to make the thread divisive from the outset, and then posed a challenge in a subsequent post.
You might need your arachnidous mate to offer you assistance should you drift off topic.
Speaking of which, the second, third and fourth posters summed up my views admirably.
So, to create a thread that prefers to divert attention to method rather than outcome, and pitch wits against each other rather than gain from knowledge and experience, is an interesting social experiment in cyberspace.

[theasxgorilla]

No market can exist without fundamentals.

WayneL, your post crystalised exactly how the two methods interplay on the market. And I'm a sucker for military analogies.

Personally, I use both, so any attempt at a divisive discussion about one method serving the other its butt on a plate is a waste of brain CPU cycles. Mix and match to varying degrees however you can make it work (read: profit).

Having said all this I think that being just a fundamental investor has got to be hard for a little guy. The only individuals I know of who consistantly make really good money from so called fundamental analysis have had the majority of their winners come via insider knowledge or tips from fund manager friends in the biz.

[Captain_Chaza]

Ahoy Rederob

Who is the/my mate you refer to????
I always seem to get lost in your all too many wordings

What point are you trying to make?
RE: The age old delimma of FA v TA

Please spell it out in plain English for us all to read

Salute for now

[rederob]

Ahoy Rederob

Who is the/my mate you refer to????
I always seem to get lost in your all too many wordings

What point are you trying to make?
RE: The age old delimma of FA v TA

Please spell it out in plain English for us all to read

Salute for now

Charlie
You are already straying off topic.
I regret you have not remembered your first mate, but perhaps age gets the better of one's memory.
There is no "dilemma" that I am aware of in terms of using FA or TA.
They are, as pointed out often, tools for the many to use.
Like any tool, mishandling can be perilous.

[nizar]

Another point. A technical trader cannot risk more than a certain percentage of their capital. A good fundamental trader might risk 50%! This is because he is confident and when the price triples he can get wealthy.

Confidence does NOT increase the probabilities of the trade.

Alot of top traders probably bought into Enron and WorldCom somewhere near the top.
I can almost guarantee you they were not the ones holding or topping up as it plummeted.