# Charts vs. Fundamentals



## nioka (29 May 2008)

So many traders talk charts all the time.A certain formation on the chart is supposed to mean so much to so many. Now if everyone believed 100% in charts they would be a self fullfilling prophecy. If a chart says BUY and everyone buys then the price would rise with the buying pressure. If a chart says SELL then everyone would sell and the price would fall. The chartists would say "see, the charts were right".

 This result would be there regardless of the result a company would be having in it's business.

  Are the chartists and system traders distorting the market? I believe they are.

  When a stock "breaks out" has it anything to do with the chart or is it;

 (a) Because chartist traders started buying because the chart said it would.or
 (b) Because the company made a favourable announcement.

 Now if the announcement caused the breakout and the chart only reflects the event, wouldn't it be better to buy on the event than later on because the chart said it was breaking out. Even better isn't it better still to pre guess the announcement, assuming an educated guess has a better than 70% chance of success.

 The point I am suggesting is that trading using fundamentals leaves trading the charts for dead. I do admit that to trade the fundamentals you do need to use the charts but forget triangles, cups etc.


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## professor_frink (29 May 2008)

*Re: Charts vs Fundamentals*

oh god here we go again. This discussion seems to pop up quite regularly, and we've had more than one thread devoted to it before.

Does it really need to be discussed again


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## tech/a (29 May 2008)

*Re: Charts vs Fundamentals*

Yep bloody hopeless.

Just a few notes exchanged between a few chartists who keep in contact here.
Note the date of the analysis.


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## pattyp (29 May 2008)

*Re: Charts vs Fundamentals*

Hi,

Respect and Use both... Charts are "group psychology" transformed into visuals... Its not magical/mystical BS...

And what are we buying...? Business'... Understanding and forecasting business' is invaluable when what you are doing is purchasing a business.

Just my opinion...

Pat


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## wayneL (29 May 2008)

*Re: Charts vs Fundamentals*



nioka said:


> So many traders talk charts all the time.A certain formation on the chart is supposed to mean so much to so many. Now if everyone believed 100% in charts they would be a self fullfilling prophecy. If a chart says BUY and everyone buys then the price would rise with the buying pressure. If a chart says SELL then everyone would sell and the price would fall. The chartists would say "see, the charts were right".
> 
> This result would be there regardless of the result a company would be having in it's business.
> 
> ...




Why are some people so cognitively biased?

As the professor says, already done to death, but just shows a lack of understanding of the purpose of TA.

BTW triangles etc have made a lot of people a lot of money, just as ratio analysis has. 

Both work if the analyst know what they are about! Get it?


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## explod (29 May 2008)

*Re: Charts vs Fundamentals*



wayneL said:


> Why are some people so cognitively biased?
> 
> As the professor says, already done to death, but just shows a lack of understanding of the purpose of TA.
> 
> ...




Could not agree more.  You have to trade off everything you can understand, get your hands on and and see from both t.a and fund.    Having said that the many newcomers need to be assisted as we were.


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## Wysiwyg (29 May 2008)

*Re: Charts vs Fundamentals*



nioka said:


> The point I am suggesting is that trading using fundamentals leaves trading the charts for dead. I do admit that to trade the fundamentals you do need to use the charts but forget *triangles*, cups etc.




Your posts are always welcome no matter what the `seen it all before` crew say nioka.

I think the technicals are possibilities only.This is my observation of one possible chart pattern ... 

A flagpole is formed by positive news.One or two days of buyers climbing over the top of each other to get in.(on the positive news)
Then there is a point where the buyers and sellers are balanced out.

A period of time follows where those who bought in on the announcement decide whether to sell or hold, and any late comers decide whether to buy in or wait for the price to come back down.

This period of time is when a pattern is formed by the thoughts of all those with interest in the stock.Typically it dips a little and people buy in or rises a little where people sell out.What happens after the announcement is the fears, emotions and common sense of those involved forming the pattern.

So observation of the psyche of those in that trade (via the pattern)will reveal a possible outcome, although there is never a 100% guarantee. 

The example below shows this in detail.Very simple but shows the basics of an event.
#something will happen to change the pattern soon.


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## nioka (29 May 2008)

*Re: Charts vs Fundamentals*



professor_frink said:


> Does it really need to be discussed again



Yes. If only to get a balance. The "chartists" seem to take credit for predicting trends that are formed by fundamentals in most cases and because of that the fundamentals, if examined closely, will get you informed BEFORE the chart reflects the event. I would sooner know what is going to cause a chart to change than see a change and have to go and look for a reason.


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## nioka (29 May 2008)

*Re: Charts vs Fundamentals*

Wysiwyg,

 The chart for AZZ that you show is a good example of getting in first with the news. An oil well in progress as it nears the pay zone a director buys shares, the first fundamental reason to buy. Then the SP rises good time to hold. Next comes the announcement you expect because of the director buying (maybe insider trading but it does go on), the share price goes crazy. You then sell, at least enough to free carry a holding, because from experience you know there will be profit taking so you get in first. 

 All the charts did was record the event.

 That's how I trade folks and it works for me.


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## wayneL (29 May 2008)

*Re: Charts vs Fundamentals*



nioka said:


> Yes. If only to get a balance. The "chartists" seem to take credit for predicting trends that are formed by fundamentals in most cases...




Nioka

1/ Only the esoteric schools (Gann etc) claim to be able to predict trends. Most TA does not attempt to predict trends at all, they are attempting "catch" trends in a timely fashion. Big difference.



> ...and because of that the fundamentals, if examined closely, will get you informed BEFORE the chart reflects the event.



I don't think any experienced TA would disagree with you here. But FA is not an exact science either. Even the best FA can get you into some real dogs. Even the best FA picks may entail some waiting for them to pay off. Look at any of the famous FA's portfolios that are published, you will see some tremendous winners, but also some abject disasters as well. The trick is getting the sum of wins bigger than the sum of losses, in that sense, both TA and FA are no different.



> I would sooner know what is going to cause a chart to change than see a change and have to go and look for a reason.



That's great. If you're making that pay, Godspeed to you. 

FA does work, sometimes fabulously, sometimes it fails.

TA does work, sometimes fabulously, sometimes it fails.

The decision for the individual is what will work best for them. I do consider FA in the macro sense and I am now forced to consider it because of the little job I have, but in my own trading operations, it is nearly irrelevant.

TA works for me. FA works for you. Different objectives of course, but both work as intended.

But only the cognitively biased indulge in this puerile TA/FA is better rubbish.  It's a bit like saying thoroughbreds are no good. That might resonate to a dressage rider, but a gallops trainer would have you committed. A Clydesdale is no good for either pursuit, but it sure can pull a heavy load.

Horses for courses. All are horses, exactly the same biological species, but bred for different objectives. Arguments over which breed is best is all relative, wouldn't you say?


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## Julia (29 May 2008)

*Re: Charts vs Fundamentals*



nioka said:


> Now if everyone believed 100% in charts they would be a self fullfilling prophecy. If a chart says BUY and everyone buys then the price would rise with the buying pressure. If a chart says SELL then everyone would sell and the price would fall. The chartists would say "see, the charts were right".



Couldn't you equally put the same argument with respect to analyst recommendations?  e.g. if six brokers come out with a Buy on a stock on any given day, there is a pretty reasonable chance buying in that stock will increase.

It would be interesting to have a study conducted over retail investors/traders to ask what criteria they employed before buying.
I suspect the proportion using charts alone would be less than is required to skew the price.


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## nioka (29 May 2008)

*Re: Charts vs Fundamentals*



wayneL said:


> Horses for courses. All are horses, exactly the same biological species, but bred for different objectives. Arguments over which breed is best is all relative, wouldn't you say?




 Good post wayne, That is exactly the point I am trying to make. Had to be a little controversial to get a reaction.


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## nomore4s (29 May 2008)

*Re: Charts vs Fundamentals*



Julia said:


> Couldn't you equally put the same argument with respect to analyst recommendations?  e.g. if six brokers come out with a Buy on a stock on any given day, there is a pretty reasonable chance buying in that stock will increase.
> 
> It would be interesting to have a study conducted over retail investors/traders to ask what criteria they employed before buying.
> I suspect the proportion using charts alone would be less than is required to skew the price.




Also most TA's would probably be using different forms of TA therefore getting different buy signals at different times.

Most TA's recognise that earnings are what will eventually drive the sp. 

But I for one have no interest in reading mountains of annoucements and financial mumbo jumbo which are pretty much all greek to me anyway.
Am happy to learn to read a chart and manage my trades that way, whereas a FA probably has no interest in the chartists mumbo jumbo.

Like Wayne has said horses for courses, don't really understand the whole FA vs TA thing. Just because you do things one way that works for you doesn't make it the best or only way for everyone else.


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## wayneL (29 May 2008)

*Re: Charts vs Fundamentals*



nomore4s said:


> But I for one have no interest in reading mountains of annoucements and financial mumbo jumbo which are pretty much all greek to me anyway.
> Am happy to learn to read a chart and manage my trades that way, whereas a FA probably has no interest in the chartists mumbo jumbo.
> 
> Like Wayne has said horses for courses, don't really understand the whole FA vs TA thing. Just because you do things one way that works for you doesn't make it the best or only way for everyone else.




Another factor I think is how the person's brain is wired. "They" say there are seven different types of intelligence. Someone who is mathematically brilliant, might have inadequate communicative/linguistic intelligence. A brilliant word-smith might not be able to add two and two together. Someone with excellent visual/spatial ability, might not be ably to communicate OR add up.

Yet all of the above are intelligent in their own way.

Some see a chart and see nothing of use, yet can forensically examine financial statements and spot the real story in a jiffy. Some see rows of very large numbers and immediately break into a cold sweat, yet can spot useable patterns on a chart and mark them up in less time than it takes to have a decent fart.

Balance sheets are sheer drudgery to me. I would rather eat gravel and stick needles in my eyes than plough through all that. Once more, I can't see the story behind the story, but I can spot patterns almost instantaneously, so TA suits.


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## motorway (29 May 2008)

*Re: Charts vs Fundamentals*

Here is a little of a Walmart Vs K-mart study..

It is a paper on information and How it disperses from the few to the many..

Really It could have been titled why are there trends in stock prices..
And What do trends tell Us..

In the beginning No one really knows 
Then a few,, eg Walmart Knew it was doing well .

It knew it was taking customers off the majors ( Those people in the regional Towns stopped travelling To the bigger centres )

Savvy investors No doubt caught on.. Also those just lucky to be come aware of it..

For a long time .. Walmart had a huge uptrend in it's share price

while

K-mart... back and filled and churned and started to slide..

For a long time broker's called K-mart a buy.. 
For a long time not many were buying Walmart

After the event everyone Knows the story

eg When something like BHP goes up for five years

We all know the reality of the China Story.. And WHY We should have bought BHP and not TLS.... But at the time , At the turning points... Maybe the charts were the only things
urging everyone Who wanted to look where the trend was forming..


Some good points below






> There are two basic questions about the financial markets: how efficient are
> the markets and will the markets become more efficient over time.
> 
> A way to assess the validity of a theory on share prices of firms is to
> ...




This why I use charts
not to track psychology or sentiment
or patterns etc

But information KNOWN by the few
BEFORE it is known by the many..

Information that might be impossibly dispersed
to ever gather together by one person.

Charts do not predict

They reveal..




motorway


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## Tradert (30 May 2008)

*Re: Charts vs Fundamentals*



nioka said:


> So many traders talk charts all the time.A certain formation on the chart is supposed to mean so much to so many.




Trading in a nutshell is managing risk and playing probability. Patterns are useful in defining targets and stops. With that been defined, an important evil is eliminated from managing your trades – Human emotion.

Investing with buy and hold approach is a different ball game. As some one said earlier in this thread - it's horses for courses. 

Stick to what works for you and keep an open mind. You never know you might end up learning something new.


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## cuttlefish (30 May 2008)

*Re: Charts vs Fundamentals*

One misconception I often see is the assumption that fundamental investing equates to a 'buy and hold' strategy.   

An active fundamental investor will adjust their position sizes and open or close positions based on changes in the fundamentals.  

The fundamental outlook can change quite frequently - influenced by overall economic factors like interest rates, consumer sentiment, commodity prices, wages growth, industrial and political factors, competition etc.  Then in the company itself their operating performance may vary from expectations and cause a re-rating (upwards or downwards). There can also be management changes, legal or structural changes, issues of capital, taking on of debt, deals with other companies etc.

Also the relative fundamental outlook vs other stocks in the sector changes often as well and the 'value' of a stock based on its market capitalisation changes so if the price rises excessively this might be a reason for a fundamental investor to take profits as well.

Stop losses and money management also apply to a fundamental based strategy and thus can cause exits or reductions in position sizes as well. 

So investing/trading based on fundamentals does not necessarily equate to 'buy and hold'.

Similarly there is no reason a technical trader can't identify a trend and then enter and ride it for years - effectively 'buying and holding'.

It is a poor strategy imo for a fundamental investor to enter a stock based on sound fundamentals but then cling to it as its fundamentals change to the negative. 

Because of the effort that has gone into researching and understanding a stock done by a fundamental investor this can be easy to do. i.e. it can be easy to 'fall in love' with a stock and convince oneself that a negative event  is just a temporary setback, rather than stepping back and re-assessing the stock objectively and unemotionally after each change that occurs.


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## haunting (30 May 2008)

*Re: Charts vs Fundamentals*



> Charts do not predict
> 
> They reveal..




MW,

My applause. This in my view the essence of charts/TA.


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## nioka (30 May 2008)

*Re: Charts vs Fundamentals*

Cuttlefish,

  I agree with all you say on the matter that is why I always say I am an investor who sometimes trades. I trade on the fundamentals and because I do not usually get a capital gains tax advantage means that I am in and out of stocks as I see their value change, often selling one because I see better value somewhere else.


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## tech/a (30 May 2008)

*Re: Charts vs Fundamentals*



nioka said:


> Cuttlefish,
> 
> I agree with all you say on the matter that is why I always say I am an investor who sometimes trades. I trade on the fundamentals and because I do not usually get a capital gains tax advantage means that I am in and out of stocks as I see their value change, often selling one because I see better value somewhere else.




Would someone care to show in a live trading exercise exactly how a Fundamental trader does this PROFITABLY.
Ive never seen it.

Those that I have seen are killed by losses.
Due to the sad lag between price and valuation.

The price drops like a stone before the Fundamentalist has re valued the stock. Its only after the drop that the value of the stock is even questioned---well from what Ive seen.


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## pattyp (30 May 2008)

*Re: Charts vs Fundamentals*

Tech,

One of my best examples of FA is MRE and the nickel Boom. The win far out-weighs my failures.

Got onto MRE as Ni started booming, MRE looked undervalued and was not popular due to the failure of Anaconda... Worth a risk IMO due to the Mine Life, High Nickel and DCF valuation/production forecast.

See Chart... I would have sold as soon as I hit my LT valuation - Except Ni was still very high so I held a little longer, then got scared about el bubble, etc.

Was a nice FA trade… one of my most "To the plan"… Still suffered some nasty periods of draw-down.

Cheers.


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## tcoates (30 May 2008)

*Re: Charts vs Fundamentals*

Just to add some pictures into the mix...

http://www.thedigeratilife.com/blog...ysis-versus-fundamental-analysis-in-pictures/

Tim


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## MichaelD (30 May 2008)

*Re: Charts vs Fundamentals*



nioka said:


> Now if everyone believed 100% in charts they would be a self fullfilling prophecy.




Actually, this is quite incorrect. What actually happens is that the more sheeple "believe" in a pattern the worse it performs since the really smart traders are profiting from the sheeple's belief (i.e. trading against them).


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## explod (30 May 2008)

*Re: Charts vs Fundamentals*



tech/a said:


> Would someone care to show in a live trading exercise exactly how a Fundamental trader does this PROFITABLY.
> Ive never seen it.
> 
> Those that I have seen are killed by losses.
> ...




Yes,  Oil Search (OSH) for a fundamentalist was a no brainer.   It became well known that they were sitting on a lot of Natural Gas more than 4 years ago.  At that stage got in at $1 and sorry I sold in 06 at $4, but a very good profit.  Family and friends are still holding and now $6


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## nioka (30 May 2008)

*Re: Charts vs Fundamentals*



tech/a said:


> Those that I have seen are killed by losses.
> Due to the sad lag between price and valuation..




 It is the lag between price and valuation that I use. There is a lag both ways, on the up and the down. It is possible to use both to your advantage. It is hard to give an example before the event but I'll give it a go.

 1.The fundamentals tell me that CFE is undervalued and has been for some time. There was a 90% chance that FIRB approval would be granted for the sale of it's iron ore find. They also told me that the sale price was almost twice the market cap for CFE. They also told me that the management had made money for me with Azetec. I bought a few weeks ago at a good price. I could have made a small profit this week on the announcement, the fundamentals tell me to hold. I don't expect to be holding this time next year. I do expect to make a good profit.

 2. I consistantly have traded back and forth with ADI and AUT. Proof of that is there if you read the ADI thread. I have a fundamental valuation which to me values their SP equally. When they get out of sync I trade one for the other to get better value. Forget what the chart says, forget what the actual price is. By doing that and creaming off some profit i have a holding which the fundamentals still tell me is undervalued and is free carried.

 3. MCR. When I "lost" my investment in nickel with the buy out of AGM by ZFX I wanted another nickel stock. (I had held SMY and did very well out of them but selling them to buy AGM.) I did a fundamental analysis and determined that MCR was in my opinion undervalued in comparison to most of the others. I valued it almost equal to SMY and only two thirds the price. I ignored the charts.

 Look these up from time to time, compare the results with what the chart would have told me to do and see where we are. The only thing that will kill me is old age not trading losses.


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## Tradert (30 May 2008)

*Re: Charts vs Fundamentals*



pattyp said:


> Got onto MRE as Ni started booming, MRE looked undervalued and was not popular due to the failure of Anaconda... Worth a risk IMO due to the Mine Life, High Nickel and DCF valuation/production forecast.




Pattyp - Nice work mate, congratulations. 

From a F/A perspective - How do you come up with stop loss level? And on what do you base them on? When do you calculate it (i.e. at the time of the trade etc.)

Just interested to know what the tools of the trade are for a fundamental analyst.


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## pattyp (30 May 2008)

*Re: Charts vs Fundamentals*



Tradert said:


> Pattyp - Nice work mate, congratulations.
> 
> From a F/A perspective - How do you come up with stop loss level? And on what do you base them on? When do you calculate it (i.e. at the time of the trade etc.)
> 
> Just interested to know what the tools of the trade are for a fundamental analyst.




Mate - This type of investment/trade is not for faint hearted... No stop loss... No time frame.

I run my DCF numbers over and over with many, many variables... Once I have a fairly conservative estimate of NPV / Fair Value, I buffer the PPS  with heavy (But realistic) future dilution... Then I make an edu-ma-kated guess at the risk and apply another offset… Say 40% off the PPS (This depends on many things).

This process gives me a "Buy under this price" value. So I buy a few, buy a few, buy a few... Careful, careful...

Once I have the Qty (Not Value) of shares I want I sit back and try not to pay much attention to daily fluctuations.

Key to all this is my inputs... eg. CAPEX, OPEX, Production Targets, Commodity Price per shipping unit...

Every week (Sometimes day) I update my DCFs to ensure that things continue on target... If I start to see Commodity prices peak... Inventories climb, New producers I then start to lighten up...

As long as the inputs remain stable, the market usually meets a conservative estimate eventually.

Daily, weekly market movements don't impact me... Only my data inputs...

I could rave for hours, so I'll stop now... But this is a good over-view of my strategy for FA Long Term investing.

Cheers,
Pat


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## nioka (30 May 2008)

*Re: Charts vs Fundamentals*



Tradert said:


> Just interested to know what the tools of the trade are for a fundamental analyst.



The tools of trade are the fundamentals themselves. Aided by an educated guess gained with experience. You check your holdings regularly for change by checking their value against their price. If they look a good buy at the current price then you hold if they don't then you sell. 

 Simple as that. All  and not many


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## tech/a (30 May 2008)

*Re: Charts vs Fundamentals*

Patty

There is nothing wrong with what your doing.
Particularly as the stocks you are trading have a far greater Profit "Possibility"
than most.
As you say the odd 20X initial buy price makes up for a fair amount of Drawdown.
Not that thats how Id like to trade.
I do understand what your doing---not the analysis.

I must admit to a trade which Y/T talked about a longtime ago.
NSL.I didnt like the chart at .025 but bought a few just as I like Y/Ts work.
I now have quite a few and holding. I like the chart now!


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## Tradert (30 May 2008)

*Re: Charts vs Fundamentals*

Pat - Thanks for the open and honest reply. 



pattyp said:


> This type of investment/trade is not for faint hearted... No stop loss... No time frame.




This approach would really make me feel uneasy. I guess you have found a way to work those other numbers that you have mentioned in your post out to your success. 

As for me I would not put a trade on without knowing my initial risk. And, T/A comes handy for that. 

There are a lot of ways to make and loss money in the financial markets. As the barefoot investor would say - tread your own path.


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## pattyp (30 May 2008)

*Re: Charts vs Fundamentals*



Tradert said:


> As for me I would not put a trade on without knowing my initial risk. And, T/A comes handy for that.




I started trading with TA before FA - And I don't care what anyone says... TA is real, it works, its not just pretty pictures and black magic... There is a clear logic beneath the "pictures"... 

The charts are a visual representation of the market psychology and news that hasn't hit mainstream. So many dismiss it as pictures... Look beyond the pictures, what do the pictures mean... If you have done a degree or course in statistics you will know that so much information can be acquired from a graph (or chart).

I use and study both TA and FA. I have so much fun drawing all over charts. I also love crunching numbers and seeing Billion Dollar Mcaps pop up before my eyes.

But due to my "real" life and family I don't have the time to "Trade"... So Investing works better for me. -- At the mo' anyway 

As always - Just my opinion!

Pat

Ps. I do sell stocks (Stop Out) once I clearly see the fundamentals change... This isn't necessarily a bad Qtrly... More often based on industry economics or the managers starting to do dodgy stuff.


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## nioka (30 May 2008)

*Re: Charts vs Fundamentals*



tech/a said:


> I must admit to a trade which Y/T talked about a longtime ago.
> NSL.I didnt like the chart at .025 but bought a few just as I like Y/Ts work.
> I now have quite a few and holding. I like the chart now!




NSL would have to be a good example of a fundamental analysis showing up a good stock. I also bought in after reading the information we got from YT. I am up over 125% and still holding.  YT's method, I believe, is based on fundamental analysis to find an emerging and undervalued stock. How about a comment on the subject from the master himself.


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## cuttlefish (30 May 2008)

*Re: Charts vs Fundamentals*



tech/a said:


> Would someone care to show in a live trading exercise exactly how a Fundamental trader does this PROFITABLY.
> Ive never seen it.
> 
> Those that I have seen are killed by losses.
> ...





There are of course plenty of examples from the upside perspective but you are asking here as I understand it about the down side perspective.  I'll give a rough sketch of a losing trade on TAM.

TAM - Feb - entry circa 10.5/11.5c avg price just under 11c  (I tend to accumulate rather than enter with a bang).  Reason - TAM price and market cap was low - quarterly production figures were high - operating margin slim but gold price rising/high - TAM had negative sentiment I believed due to the VRE situation and being a similar high cost producer.  So it provided a good leveraged entry to high gold price and would generate significant profit vs market cap if production figures were maintained whilst the gold price was high.  I could of course write much more on the various reasons and metrics I used to decide to enter but thats a very rough sketch.

TAM - mid to late march - over a couple of weeks I partialy exited about half my holding  - due to gold price run not continuing and instead the gold price was falling.  For a high leverage/narrow margin gold producer this significantly affected its fundamental outlook.

(Note there are other gold stocks, quite a few still in my portfolio, and some I've increased my holding in, that were purchased at various stages during 07 that have benefited very well from the gold price run as well as exploration and/or production success and that are not as leveraged to the gold price, but I'm giving an example of a losing situation here and how the fundamentals get me out as well as in).

TAM - 28th April - blandly titled "operations update" released. An apparently minor grade estimation issue at a small satellite open pit that was to provide temporary ore feed whilst underground access was being developed at gonzales was the trigger for me exiting the majority of the remainder of my position.  The reason being that if they can't estimate the grade of a small satellite pit properly then I had no confidence they would achieve predicted grades in any other areas.  Given they are a high operating cost operation grade is crucial so if I can't have confidence in the grades then I can't invest in the business.  It also reflected on management and I had some skepticism about management from past issues.

TAM - 29th April and days following exited the small remainder of the position.


By making the adjustments that I did based on the various fundamental factors I managed to exit from an average 11c entry at prices averaging around the 9.5c mark when all sales are considered. In particularly it got me out of most of my holding before a one day drop from 9.5c to 8c on the 29th of April when their quarterly was released.

After the price fell from 9.5c to 8c it continued down to a low of 7c before beginning to recover.  

I am unlikely to re-enter this unless I'm confident that management have estimated grades properly with appropriate density of in-fill drilling, or there is a clear track record of good operating grades from one or two quarters of production though of course that could change with new information both external or company related.

Had I not exited at a higher price due to the fundamental inputs that changed my viewpoint, I also had a stop loss at 9c based on money management rules.  However if I tried to exit all my holdings in one go when the stock hit that price I would probably only have obtained 8.5c or less so I would have reduced over a few days or weeks if the price hit this level, rather than just dumped.

There are many other factors I haven't mentioned, including that there were other companies getting into production with more reliable grade estimates and better margin that proved more attractive, and there was also a fund that had a position in TAM that influenced some of my thinking both about entry and exit. 

I also haven't mentioned the technical factors that influenced my decision but one reason for the 10.5c/11c entry price was that I felt it had reasonably strong technical support at the 10c level based on the historical chart which would also limit downside, and then the fact that this support level had been broken certainly added to the reasons for exiting though wouldn't have been adequate on its own for me.


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## nioka (30 May 2008)

*Re: Charts vs Fundamentals*



professor_frink said:


> oh god here we go again. This discussion seems to pop up quite regularly, and we've had more than one thread devoted to it before.
> 
> Does it really need to be discussed again



 Sorry professor, hope you haven't kept banging your head. 33 posts in less than 24 hours seems to me that the subject still needs discussion.


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## professor_frink (30 May 2008)

*Re: Charts vs Fundamentals*



nioka said:


> Sorry professor, hope you haven't kept banging your head. 33 posts in less than 24 hours seems to me that the subject still needs discussion.




That's good nioka. Enjoy your gloating. I'm not quite sure why it's required, but enjoy it anyway.

:dunno:


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## MRC & Co (30 May 2008)

*Re: Charts vs Fundamentals*

Fundamentalists exploit chartists to buy in on the cheap.  

So you should be thankful!


----------



## nioka (30 May 2008)

*Re: Charts vs Fundamentals*



MRC & Co said:


> Fundamentalists exploit chartists to buy in on the cheap.
> 
> So you should be thankful!




I am.


----------



## MichaelD (30 May 2008)

*Re: Charts vs Fundamentals*

Is it just me, or do these successful (and unsuccessful) fundamental trades look uncannily like;

"cut your losses short and let your profits run"


----------



## nioka (30 May 2008)

*Re: Charts vs Fundamentals*



MichaelD said:


> Is it just me, or do these successful (and unsuccessful) fundamental trades look uncannily like;
> 
> "cut your losses short and let your profits run"




 Definitely not. Some investments may be behind today but the fundamentals say they are good value so you hold. Another may be well in front but the fundamentals say they may be fully priced or overpriced so you sell. 

eg. Check the LYC thread where months ago I said I was selling because they were fully priced and that I would buy back when they were closer to production. I was making 250%+ at the time and they were not going to fall a lot.
     I hold ADI which a lot of investors gave up on. I hold because Agentm has done fantastic fundamental research that has shown me there is a better than 70% chance of them being a great investment.

    The fundamentals are regularly checked regardless of profit or loss. A buy or sell decision is made regardless of the profit or loss situation.

    Works for me most of the time but I'm not always right.


----------



## MRC & Co (30 May 2008)

*Re: Charts vs Fundamentals*



nioka said:


> I hold because Agentm has done fantastic fundamental research




Who is Agentm and who is the master you refer to above in reply to tech/a?


----------



## nioka (30 May 2008)

*Re: Charts vs Fundamentals*



MRC & Co said:


> Who is Agentm and who is the master you refer to above in reply to tech/a?




Check out the ADI thread for AgentM and see some real and consistant fundamental analysis. The other is YT (young trader) whose fundamental analysis is a legendary. To see YT in action check out his contribution to quite a few threads including NSL. This years success that I have had is to some extent on the back of the back of their fundamental analysis. The information posted by YT on NSL convinced me to have a look at it.


----------



## tech/a (31 May 2008)

*Re: Charts vs Fundamentals*

A further question.
Not a go just a question/observation.

While F/A is pointing to undervalued (Particularly Small Caps) I find it interesting how many there actually are mentioned on the boards.
There would be at least 50.

Now what amuses me is that when one of these go off there are a few that have (Or say they have ) 1 million shares or so this can be from $10-50k parcels.

And this happens EVERTYTIME one lifts off---not before---although there are normally 100s of posts discussing this announcement or that report.

So with 50 or so I have my suspicions that these guys don't have a couple of Million to play with. They dont have 1/2 or 1 million shares in EVERY call--although once they take off--magic!

So my question is one of PRACTICALLITY---
While there is some excellent F/A out there its basically hit and miss. I suspect more miss than hit!

Hence my request for a *practical* demonstration of *HOW* this is done *LIVE*.

This would take a list of stocks the buy price and then sells once they were made just like Radge does on his Power setups and I do on Techtrader.

Is this (F/A approach) REALLY profitable "Longterm".

Another observation is that in my view NOW is the time for small explorers and Miners---there are fortunes to be made here--*DONT MISS OUT.*


----------



## nioka (31 May 2008)

*Re: Charts vs Fundamentals*



tech/a said:


> A further question.
> Not a go just a question/observation.
> 
> While F/A is pointing to undervalued (Particularly Small Caps) I find it interesting how many there actually are mentioned on the boards.
> ...



 Tech, 

 Your post raises interesting points.

I find the smaller the cap the smaller the trades must be to get value. If there are any decent trades then the SP fires up. Even putting in a reasonable buy order can make a difference. eg. In my trading back and forth between ADI and AUT I found it best to limit my buys and sells to around the 10000 unit mark as on the best days there were often only 50,000 shares traded. My type of trading maybe would not suit the multi multi millionaire but it works for me. Slow and steady wins the race, the sprinters come and go, the stayers accumulate unnoticed.

  Longterm. Because my trading is based on assessing value on a regular basis it is profitable on bad markets or good ones, bulls or bears. All you have to do is make sure that your investment is as good a value as you can find at that time in that market. It relies on holding undervalued stocks. 

Would Warren Buffett disapprove, his trading is based on F/A isn't it.

  You are insisting that we have to prove the point by nominating trades ahead of time. I dont know what I will do Monday until I check my watch lists, read the news, look for announcements then make a decision. At this stage I am watching AUT and ADI for a chance to trade from one to the other with advantage. I will be watching to sell CNP in the 60c range. I will be watching CFE, if it falls I will buy. I doubt if I will sell but if it goes crazy I will sell. I hold AOE and anything can happen with it, I will be watching but doubt if I will buy or sell at this stage. I am accumulating MOS or MOSO slowly, if they fall I will buy but I expect to hold for months so I will not sell. 

What more can I say.I don't have to prove to myself that my system works and I'm sure it works for others too. Is there somewhere out there someone who can prove that it doesn't work.


----------



## nioka (31 May 2008)

*Re: Charts vs Fundamentals*



tech/a said:


> Another observation is that in my view NOW is the time for small explorers and Miners---there are fortunes to be made here--*DONT MISS OUT.*




 The only reasons there are fortunes to be made is because they are specs where most of them will fail and only a few will hit pay dirt. The use of F/A may help pick the winners. It should help show up the ones that will fail.

 I often say to someone suggesting that a stock is good buying at 2c " If the stock had a par value of 20c, find out where the other 18c was spent before you buy at 2c". That is fundamental analysis. That is better information than someone saying it is breaking out because a chart shows it has risen from 1c over three days when a three month high had been1.5c.


----------



## It's Snake Pliskin (1 June 2008)

*Re: Charts vs Fundamentals*



tech/a said:


> A further question.
> Not a go just a question/observation.
> 
> While F/A is pointing to undervalued (Particularly Small Caps) I find it interesting how many there actually are mentioned on the boards.
> ...




Long term FA or TA forecasts, though unintentionally, can mislead.

Tech can you provide more info on your "NOW" opinion? It seems to be just a statement without much to support it. I am genuinely interested.


----------



## It's Snake Pliskin (1 June 2008)

*Re: Charts vs Fundamentals*



nioka said:


> The only reasons there are fortunes to be made is because they are specs where most of them will fail and only a few will hit pay dirt. The use of F/A may help pick the winners. It should help show up the ones that will fail.
> 
> I often say to someone suggesting that a stock is good buying at 2c " If the stock had a par value of 20c, find out where the other 18c was spent before you buy at 2c". That is fundamental analysis. That is better information than someone saying it is breaking out because a chart shows it has risen from 1c over three days when a three month high had been1.5c.




Nioka,

Thanks for the perspective on FA.


----------



## tech/a (1 June 2008)

*Re: Charts vs Fundamentals*

*Snake* this is a list of all stocks which have risen 100% or more over the last 6 mths.
Have a look at which sectors the majority come from.

There is a way to determine which sectors are considered *HOT* by the big end of town. If interested Private mail me and I'll show you how I find them

Security Name	Column A	Ticker Symbol	Folder	
ALTERA RSRCS LTD	1.0000	AEA	C:\My Databases\MetaStock\ASX\A0	
ANALYTICA LMTD	1.0000	ALT	C:\My Databases\MetaStock\ASX\A0	
ANGLO PACIFIC G	1.0000	AGP	C:\My Databases\MetaStock\ASX\A0	
AQUILA RESOURCES	1.0000	AQA	C:\My Databases\MetaStock\ASX\A0	
AVANTOGEN LMTD	1.0000	ACU	C:\My Databases\MetaStock\ASX\A0	
BAUXITE RSRC LTD	1.0000	BAU	C:\My Databases\MetaStock\ASX\B0	
BOWEN ENERGY L	1.0000	BWN	C:\My Databases\MetaStock\ASX\B0	
CENTAURUS RSRCS	1.0000	CUR	C:\My Databases\MetaStock\ASX\C0	
CHINA WEST H	1.0000	CWH	C:\My Databases\MetaStock\ASX\C0	
CI RESOURCES L	1.0000	CII	C:\My Databases\MetaStock\ASX\C0	
COAL OF AFRC LT	1.0000	CZA	C:\My Databases\MetaStock\ASX\C0	
COCKATOO COAL	1.0000	COK	C:\My Databases\MetaStock\ASX\C0	
COUGAR ENERGY	1.0000	CXY	C:\My Databases\MetaStock\ASX\C0	
COUNTRY ROAD L	1.0000	CTY	C:\My Databases\MetaStock\ASX\C0	
DESERT ENERGY	1.0000	DSN	C:\My Databases\MetaStock\ASX\D0	
DMC MINING LMTD	1.0000	DMM	C:\My Databases\MetaStock\ASX\D0	
EMBELTON LIMITED	1.0000	EMB	C:\My Databases\MetaStock\ASX\E0	
ENTERPRISE ENRGY	1.0000	EPE	C:\My Databases\MetaStock\ASX\E0	
ERMNG HYDRCRBN	1.0000	ERH	C:\My Databases\MetaStock\ASX\E0	
FELIX RSRCS LTD	1.0000	FLX	C:\My Databases\MetaStock\ASX\F0	
FLINDERS DMNDS	1.0000	FDL	C:\My Databases\MetaStock\ASX\F0	
FOREST PLACE GRP	1.0000	FPG	C:\My Databases\MetaStock\ASX\F0	
FRTSC MTLS GRP	1.0000	FMG	C:\My Databases\MetaStock\ASX\F0	
FUTURE CRPRTN	1.0000	FUT	C:\My Databases\MetaStock\ASX\F0	
GARRATT S LMTD	1.0000	GRT	C:\My Databases\MetaStock\ASX\G0	
GENESIS MINERALS	1.0000	GMD	C:\My Databases\MetaStock\ASX\G0	
GLOUCESTER COAL	1.0000	GCL	C:\My Databases\MetaStock\ASX\G0	
GOLDEN CHINA	1.0000	GCX	C:\My Databases\MetaStock\ASX\G0	
GRNVL MNNG NL	1.0000	GRVCA	C:\My Databases\MetaStock\ASX\G0	
GUJARAT NRE	1.0000	GUJ	C:\My Databases\MetaStock\ASX\G0	
HAMPTON HILL M	1.0000	HHM	C:\My Databases\MetaStock\ASX\H0	
HAOMA MINING NL	1.0000	HAO	C:\My Databases\MetaStock\ASX\H0	
HARRINGTON GROUP	1.0000	HGR	C:\My Databases\MetaStock\ASX\H0	
HITEC ENERGY L	1.0000	HTE	C:\My Databases\MetaStock\ASX\H0	
HUDSON INVSTMNT	1.0000	HGL	C:\My Databases\MetaStock\ASX\H0	
HUDSON RESOURCES	1.0000	HRS	C:\My Databases\MetaStock\ASX\H0	
ICON ENERGY LMTD	1.0000	ICN	C:\My Databases\MetaStock\ASX\I0	
INCITEC PIVOT	1.0000	IPL	C:\My Databases\MetaStock\ASX\I0	
INFOCHOICE LMTD	1.0000	ICH	C:\My Databases\MetaStock\ASX\I0	
INTRNTNL GLD	1.0000	IGC	C:\My Databases\MetaStock\ASX\I0	
LINC ENERGY LTD	1.0000	LNC	C:\My Databases\MetaStock\ASX\L0	
LNDN CTY EQ LTD	1.0000	LCE	C:\My Databases\MetaStock\ASX\L0	
MACARTHUR COAL	1.0000	MCC	C:\My Databases\MetaStock\ASX\M0	
MINDAX LIMITED	1.0000	MDX	C:\My Databases\MetaStock\ASX\M0	
MINEMAKERS LMTD	1.0000	MAK	C:\My Databases\MetaStock\ASX\M0	
NETCOMM LIMITED	1.0000	NTC	C:\My Databases\MetaStock\ASX\N0	
NEW HOPE CRPRTN	1.0000	NHC	C:\My Databases\MetaStock\ASX\N0	
NSL HEALTH LMTD	1.0000	NSL	C:\My Databases\MetaStock\ASX\N0	
NWHVN HTLS LTD	1.0000	NHH	C:\My Databases\MetaStock\ASX\N0	
OM HOLDINGS LMTD	1.0000	OMH	C:\My Databases\MetaStock\ASX\O0	
PANBIO LIMITED	1.0000	PBO	C:\My Databases\MetaStock\ASX\P0	
PHILEO AUSTRALIA	1.0000	PHI	C:\My Databases\MetaStock\ASX\P0	
PURE ENERGY	1.0000	PES	C:\My Databases\MetaStock\ASX\P0	
RAWSON RESOURCES	1.0000	RAW	C:\My Databases\MetaStock\ASX\R0	
REWARD MNRLS LTD	1.0000	RWD	C:\My Databases\MetaStock\ASX\R0	
REY RESROUCES L	1.0000	REY	C:\My Databases\MetaStock\ASX\R0	
RIMCAPITAL LMTD	1.0000	RMC	C:\My Databases\MetaStock\ASX\R0	
ROMA PETROLEUM N	1.0000	RPM	C:\My Databases\MetaStock\ASX\R0	
SAPEX LIMITED	1.0000	SXP	C:\My Databases\MetaStock\ASX\S0	
SIETEL LIMITED	1.0000	SSL	C:\My Databases\MetaStock\ASX\S0	
STEAMSHIPS TRDNG	1.0000	SST	C:\My Databases\MetaStock\ASX\S0	
STOKES ASTRLS	1.0000	SKS	C:\My Databases\MetaStock\ASX\S0	
TASMANIA MNS LT	1.0000	TMM	C:\My Databases\MetaStock\ASX\T0	
UNITED MINERALS	1.0000	UMC	C:\My Databases\MetaStock\ASX\U0	
VEALLS LIMITED	1.0000	VELCP	C:\My Databases\MetaStock\ASX\V0


Just like the Housing boom this isnt to be missed,we get this only once in our life time.
There was the Tech boom,Housing Boom and now the Rescource Boom.
All aboard!


----------



## nioka (1 June 2008)

*Re: Charts vs Fundamentals*



tech/a said:


> *Snake* this is a list of all stocks which have risen 100% or more over the last 6 mths.
> Have a look at which sectors the majority come from.
> Just like the Housing boom this isnt to be missed,we get this only once in our life time.
> There was the Tech boom,Housing Boom and now the Rescource Boom.
> All aboard!




 Certainly an impressive list but they are now history. Were they predictable using T\A before they increased in price. F\A would more likely have picked the winners. 
Take NSL as an example from the list. I've done OK with it and bought on the F/A done by YT. I've done very well out of AOE this year and last year, buying and selling using F/A. My last sale trading was selling before the fall at $2.70+ and rebuying later on at $1.70 and I still hold those.

I suggest a fundamental analysis of those stocks that have doubled in price should show those that have real value and show up those that are only rising with the bubble.


----------



## tech/a (1 June 2008)

*Re: Charts vs Fundamentals*

Ive certainly not participated in all of these.
OMH
GCL
FLX
MCC
COK
RWD

To name the main ones.(Ive been in)
The point is that I believe this to be the tip of the iceburg.
The very beginning.
If everyone could have seen the property boom early enough then everyone would have a host of Properties they all bought for 150K now worth 450K

Well---those that recognise this opportunity in 5-10 yrs time could well have multiple stock holdings worth way more than 4 times their initial purchase price.

It doesnt matter HOW you find these gems,T/A---F/A or a combination of both.
What I'm suggesting is there is a massive opportunity and its NOW.

Of course the trick is milking all you can from the sector.


----------



## It's Snake Pliskin (3 June 2008)

*Re: Charts vs Fundamentals*



tech/a said:


> *Snake* this is a list of all stocks which have risen 100% or more over the last 6 mths.
> Have a look at which sectors the majority come from.
> 
> There is a way to determine which sectors are considered *HOT* by the big end of town. If interested Private mail me and I'll show you how I find them
> ...




Thanks for the response T/A.


----------



## cuttlefish (3 June 2008)

*Re: Charts vs Fundamentals*

Tech - because the small cap mining/exploration sector tends to be about taking fairly big risks with capital in the hope of big rewards its not necessarily surprising that it yields the most big gainers.  Out of curiousity if you search for stocks that lost 50% or more over the past 6 months which sectors feature?  I'm curious because I think its possible the junior mining/exploration could feature in both.


----------



## nizar (4 June 2008)

*Re: Charts vs Fundamentals*



nioka said:


> F\A would




WOW thats a big call.


----------



## tech/a (4 June 2008)

*Re: Charts vs Fundamentals*



cuttlefish said:


> Tech - because the small cap mining/exploration sector tends to be about taking fairly big risks with capital in the hope of big rewards its not necessarily surprising that it yields the most big gainers.  Out of curiousity if you search for stocks that lost 50% or more over the past 6 months which sectors feature?  I'm curious because I think its possible the junior mining/exploration could feature in both.




I have no doubt they do.
BUT------


A good trader wouldnt take a 50% loss he'd be out with very small losses.
A good trader would however keep anything moving forward as long as it did so for as long has his ability allowed him to.
If you understand how to control and mitigate your risk trading Small caps is no more risky than trading the Blue chips.

If you dont then its gambling!

Do you think Casino's think they're gamblers?
They run a business you create an edge.
You as a trading "business" are no different!


----------



## nioka (4 June 2008)

*Re: Charts vs Fundamentals*



nizar said:


> WOW thats a big call.




 Do you doubt that a fundamental analysis of those that have shown an increase of 50% or more would show the ones capable of going on and show up those that are riding along in a bubble only. 

 I'll admit to a lot of big calls and I'm not always right but don't you think the point I make is worth investigating?


----------



## johenmo (17 June 2008)

*Re: Charts vs Fundamentals*

Fundamentals are important but published fundamentals don't change qucikly enough.  Have also learned recently that the "fundamentals" don't always tell the truth - depends what's not on the books.

A mix of the two, depending on what your overall strategy is (day trading versus investing), must give the best guidance.  History is littered with businesses who had sound published fundamentals with all sorts of behind the scenes deals/setups, and eventually went under.  With some of the top guys ending in court.

There will be people who have done well and others who have done poorly using one or the other.

It's not only what tools you  have, but how you use them that gives the right result.

So the argument is almost "circular".


----------



## It's Snake Pliskin (25 September 2008)

*Re: Charts vs Fundamentals*



nioka said:


> Certainly an impressive list but they are now history. *Were they predictable* using T\A before they increased in price. *F\A would more likely have picked the winner*s.
> Take NSL as an example from the list. I've done OK with it and bought on the F/A done by YT. I've done very well out of AOE this year and last year, buying and selling using F/A. My last sale trading was selling before the fall at $2.70+ and rebuying later on at $1.70 and I still hold those.
> 
> I suggest a fundamental analysis of those stocks that have doubled in price should show those that have real value and show up those that are only rising with the bubble.




Here lies the biased...

Predictable? Nothing is predictable so I find the above strange.


----------



## kam75 (13 October 2008)

*Re: Charts vs Fundamentals*

There is no discussion here.  You do whatever works for YOU and makes you money.  The key is CONSISTENCY.  If its TA that works for you, stick to TA.  If its FA, do FA - Buffett seems to do allright with it. If its Gann, by all means read your astrology charts.  

I find that a fundamendal screen followed by TA works best for me.  The bottom line is, there is no right or wrong way provided its consistent and repeatable and makes money.


----------



## nioka (13 October 2008)

*Re: Charts vs Fundamentals*



It's Snake Pliskin said:


> Here lies the biased...
> 
> Predictable? Nothing is predictable so I find the above strange.




A fundamental investment plan needs, and has, flexability. The plan must be updated daily to work with the changing circumstances. Values change daily and so the plan changes daily. Charts only record the past. Fundamentals can predict the future with more accuracy. That's my opinion, obviously it doesn't suit everyone.

And yes I am biased.


----------



## Garpal Gumnut (13 October 2008)

*Re: Charts vs Fundamentals*



kam75 said:


> There is no discussion here.  You do whatever works for YOU and makes you money.  The key is CONSISTENCY.  If its TA that works for you, stick to TA.  If its FA, do FA - Buffett seems to do allright with it. If its Gann, by all means read your astrology charts.
> 
> I find that a fundamendal screen followed by TA works best for me.  The bottom line is, there is no right or wrong way provided its consistent and repeatable and makes money.




Agree Kam, I use mostly fundamentals as a screen and then TA. I find AFR, Compareshares and Businesspectator good sources. Interestingly there is often a 3 month lag between fundamental news and any move on the charts, after the initial jump it settles. Tip sheets I find are generally crap.

And yes whatever works, go for it.

One of the best tips ever I got from a bloke at an Australian Shareholders Association meeting, that he got on the golf course, believe it or not , it was on the button and once the charts showed a move I was in.

gg

gg


----------



## skyQuake (13 October 2008)

*Re: Charts vs Fundamentals*



nioka said:


> Charts only record the past.




Fundamentals do so too... Extrapolation based on PAST company announcements, earnings, ratios etc. A t/a plan could be flexible too, doesn't have to change daily, can change weekly, hourly etc...
Same difference imo, both are representations of past data.


----------



## AlterEgo (13 October 2008)

*Re: Charts vs Fundamentals*



skyQuake said:


> Fundamentals do so too... Extrapolation based on PAST company announcements, earnings, ratios etc. A t/a plan could be flexible too, doesn't have to change daily, can change weekly, hourly etc...
> Same difference imo, both are representations of past data.




Yep, I agree. All information known about a company, whether fundamental or technical, is all based on past history. Neither can predict the future.


----------



## cordelia (13 October 2008)

*Re: Charts vs Fundamentals*

It is true that charts do only record the past but I have often  considered what are they actually recording?.....I perceive a chart to be a visual representation of past human behaviour in relation to a particular stock....

Clearly charts cannot predict the future..but they can draw attention to past patterns of human behaviour.....and  as such illuminate possible trading opportunities....

I don't believe that fundamental analysis and technical analysis are mutually exclusive...IMO To ignore fundamentals and only trade according to the charts is as blindsighted as only paying attention to the fundamentals with little regard for charts....There needs to be a balance..


Our current market situation highlights this so well.....The financial turmoil is unprecedented..charts reflect the past...so relying on them as the sole  indicator for a trade in this market is unreliable....


----------



## The Edge (1 November 2008)

*Re: Charts vs Fundamentals*

Friday  31 October 2008

To the comment:

> TA does work, sometimes fabulously, sometimes it fails.

TA does not fail, it is the one employing it improperly
that fails.


To the opinion:

> IMO To ignore fundamentals and only trade according 
> to the charts is as blindsighted as only paying attention 
> to the fundamentals with little regard for charts....There 
> needs to be a balance..


Actually, what are charts but a pictorial representation of
the fundamentals, in part, and the most accurate depiction
one can have of all the forces of supply and demand that
makes a market move.

Fundamentals, while important, are also relative, and
perceptions about them can change.  Tell me how to
extract that from the fundamentals?

Charts will always show it.  Argue it however you will,
facts are facts.  Charts are facts in print.

[This is not to suggest that knowing how to read these
facts is easy.  Many technical analysts have their
analytical heads up their opinions.]

TA is an art, pure and simple.

A market, in and of itself is neutral.  All it does, and all it
can do, is reflect the results from the meeting of buyers
and sellers at any given time.  Being neutral, the "market"
has no opinion, no beliefs.  The opinions and beliefs about
the market arise from those participants placing their bets, 
as it were.

When you hear someone say, "The market got me today,"
or "The market killed me," it is an abdication of
responsibility.  The market is a meeting place.  It could
care less what your opinions/beliefs are as you place a
trade.  If a trade is done unwisely, it is not that the
market "got you," rather, you did not know what you
were doing at the time you did it.

Motorway expressed it well,  "Markets do not predict,
they reveal."

How one choses to participate in a market is the most
revealing of all.

Just a few thoughts.


----------



## Glen48 (1 November 2008)

*Re: Charts vs Fundamentals*

In my humble opinion a lot is second guessing, price oil goes down so Airlines go up but commonsense tells you Oil is going up and down like *****s draws.
Platinum goes down because cars sales are down, cars use Platinum in Cat.converters in the exhaust system.
A company makes a profit yet their shares take a dive because punters expected a bigger profit.
Dow rises Friday night in USA by 9% and in OZ we get 1% increase.
USA is Bankrupt yet the USD is good.
Gold should be going skywards yet it is hovering around $700 + - 10 cents.
I would be looking at insurance Companies taking a dive as things get tighter the average home owner will cut out / cut down their insurance 
Can any chart/system predict that?


----------



## nunthewiser (1 November 2008)

*Re: Charts vs Fundamentals*



Glen48 said:


> In my humble opinion a lot is second guessing, price oil goes down so Airlines go up but commonsense tells you Oil is going up and down like *****s draws.




ahha but the smarter ones like QAN hedge part of there fuel costs when the price is low


----------



## tasmanian (1 November 2008)

*Re: Charts vs Fundamentals*

I think the market of late should finally answer the fundamental Vs chart debate.

Fundamentalists would be down alot more than anyone half decent in reading charts over the last 12mths.

Comments should be some good reading.

cheers.


----------



## arco (1 November 2008)

*Re: Charts vs Fundamentals*

.
I do bad with FA

I do good with TA

So IMO stick with what works for you.

rgds - arco


----------



## The Edge (2 November 2008)

*Re: Charts vs Fundamentals*

Saturday  1 November 2008

> Can any chart/system predict that?

Ask the wrong question, and you will get
the wrong answer every time.

For clarity, charts do not predict.


----------



## tasmanian (2 November 2008)

*Re: Charts vs Fundamentals*

charts do not predict but they definetely give you an edge


----------



## nulla nulla (2 November 2008)

*Re: Charts vs Fundamentals*

Most breakouts I have seen, rarely seem to have been influenced by chartists interpretaion of their wiggly lines suddenly deciding enmass "now is the time to buy or sell". I would suspect most surges or plunges, evidencing a break out, are the results of leaked information and the people in the know moving to take advantage.


----------



## tech/a (2 November 2008)

*Re: Charts vs Fundamentals*

Having been charting for 14 yrs my conclusion is that charts are a graphical representation of crowd behaviour.
You can read it.
You can take advantage of it.
You just need to know how.

Does it make you the money?
Application is just the vehical---controlling risk is the fuel.
Money/Trade management is the driver (You).

Put it all together you get a profitable business---the end destination.


----------



## Garpal Gumnut (2 November 2008)

*Re: Charts vs Fundamentals*

If you want a good laugh at fundamentalists read what the "experts" have to say in this weekend's afr.

"Maybe this, could be that, long term, time to buy, earnings, valuations more realistic, we have cut our targets, may be too soon, prescient to buy, etc etc."

It reads more like the Beano than a financial newspaper.

gg


----------



## MRC & Co (2 November 2008)

*Re: Charts vs Fundamentals*



arco said:


> .
> I do bad with FA
> 
> I do good with TA
> ...




Good post arco.

While I pretty much use 100% technical, you cannot write off the use of fundamentals.  Tudor-Jones and Soros (I believe use global macro along with technicals) and we all know about Mr Buffett (though no doubt, he knows a lot more than just fundamental analysis).  

Once again, IR announcement this Tuesday, a case where fundamentals can potentially be used to trade and make much more $$$ than most technicals can make you in a month (or more than most make in a year or two).  Some will argue you can see this in the chart anyways, but knowing the news is coming and getting in first (a split second earlier), not only gives you the conviction to do so with big size, but also the ability to be the first to get in, before the chart even reveals the breakout (and you don't even need inside information ).


----------



## nunthewiser (2 November 2008)

*Re: Charts vs Fundamentals*

uses both ........ st trades 90% ta .....long term investing 80% fundamentals and 20% ta for entry point purposes


----------



## skyQuake (2 November 2008)

*Re: Charts vs Fundamentals*



nulla nulla said:


> Most breakouts I have seen, rarely seem to have been influenced by chartists interpretaion of their wiggly lines suddenly deciding enmass "now is the time to buy or sell". I would suspect most surges or plunges, evidencing a break out, are the results of leaked information and the people in the know moving to take advantage.




Probably true in relation to speccys, but even then, those insiders need to be positioned (accumulation in the consolidation) before the surge (public buying). Charts will alert you to consolidation and the early stages of the surge.

Breakouts in shorter timeframes in relation to trading futures can be played with technicals, although its a fair bit different from traditional charting methods.


----------



## Value Hunter (17 October 2014)

Hope you chartists have fun with your squiggly line voodoo. I just laugh when I see people use charts. Might as well be reading tea leaves. 

I'll just stick to the fundamentals thanks


----------



## McLovin (17 October 2014)

Value Hunter said:


> Hope you chartists have fun with your squiggly line voodoo. I just laugh when I see people use charts. Might as well be reading tea leaves.
> 
> I'll just stick to the fundamentals thanks




You had to drag up a six year old thread to start a tech v fundamental argument. Great.


----------



## barney (17 October 2014)

Value Hunter said:


> Hope you chartists have fun with your squiggly line voodoo. I just laugh when I see people use charts. Might as well be reading tea leaves.
> 
> I'll just stick to the fundamentals thanks





I agree 100%   .... 100%  .........  now, back to my charts:


----------



## rb250660 (17 October 2014)

Us tasseographists are outraged!!

You've made me so angry I'm going for a cup of tea so I have something to read later.


----------



## ThingyMajiggy (17 October 2014)

Value Hunter said:


> Hope you chartists have fun with your squiggly line voodoo. I just laugh when I see people use charts. Might as well be reading tea leaves.
> 
> I'll just stick to the fundamentals thanks




So you knew the DAX was going to drop 250 points yesterday and recover most of it back up by the end of the session with fundamentals? Interesting, enlighten us.


----------



## pixel (17 October 2014)

Value Hunter said:


> Hope you chartists have fun with your squiggly line voodoo. I just laugh when I see people use charts. Might as well be reading tea leaves.
> 
> I'll just stick to the fundamentals thanks




If you only know how to use a hammer, everything will look to you like a nail.
If you know the difference between a hammer, a soldering iron, and a saw, and if you can use all three with equal expertise, you will find it a lot easier to build something useful.


----------



## DeepState (17 October 2014)

Value Hunter said:


> Hope you chartists have fun with your squiggly line voodoo. I just laugh when I see people use charts. Might as well be reading tea leaves.
> 
> I'll just stick to the fundamentals thanks




...and what exactly is your problem with tea leaves? Huh?


----------



## rb250660 (17 October 2014)

ThingyMajiggy said:


> So you knew the DAX was going to drop 250 points yesterday..




I was having quite a serious discussion with a work colleague today about making dacking people in our age group acceptable. I can't believe it is still restricted to school children in the playground...

http://www.youtube.com/watch?v=eDZKJvGC__M

It takes a fair bit of skill to do the undie grab with a standard dacking. Impressive Fitzy.


----------



## Muschu (17 October 2014)

Thread being over-ridden with semantics and defensiveness?

We're all different and market prediction is not an exact science..... Or is it?


----------



## rimtas (17 October 2014)

Value Hunter said:


> I just laugh when I see people use charts. Might as well be reading tea leaves.
> 
> I'll just stick to the fundamentals thanks





I also had a laugh at first, when I noticed that almost everyone(about 95% ) are using fundamental analysis. I thought-if everyone uses it, it just simply doesn't work.  
Then I realized, that these 95% of traders/investors, who are loosing money in markets, are the same people who use fundamental analysis. I stoped laughing since then and I feel just sorry for them all.
 Years, decades and centuries are passing by, but everyone is still sticked to the strategy that generates only losses. 
I know many people who changed their view and started to look at charts instead, but do not know _anyone_, who threw charting in the bin and started with fundamentals instead. 

The view on fundamental analysis is so entrenched in people's minds over decades , that the doctrine of socionomic reasoning  looks like cosmos. 
I think they will never give up looking for the future in fundamentals, they just need to die off and let the new generation with different logic take their place.

 The chartist community is growing everyday, and they _make_ money, instead of  gambling by looking at balance sheets .


----------



## barney (17 October 2014)

Value Hunter said:


> Hope you chartists have fun with your squiggly line voodoo. I just laugh when I see people use charts. Might as well be reading tea leaves.
> 
> I'll just stick to the fundamentals thanks





Pretty sure you're only stirring the pot VH which is all in good fun ....... but just to condense the situation ....

Charts are simply a visual representation of the short term perceived Fundamental value of a given Company/whatever.

The problem is that most punters are poorly equipped to gauge the true values of anything (me included) , so we follow the herd/chart to make our decisions ....

The bigger the Stock/whatever etc., the bigger the Herd, and the longer it takes for a miscalculation to mean revert, hence why Charts represent an opportunity to make profits regardless of whether they are a true representation of value or not  ..... simple really


----------



## DeepState (17 October 2014)

:nunchux:
	

		
			
		

		
	




Cougar: Stinger, we have been engaged....Sidewinder 1 is hot...we're going in.  Got good tones...




rimtas said:


> I also had a laugh at first, when I noticed that almost everyone(about 95% ) are using fundamental analysis. I thought-if everyone uses it, it just simply doesn't work.
> 
> Then I realized, that these 95% of traders/investors, who are loosing money in markets, are the same people who use fundamental analysis. I stoped laughing since then and I feel just sorry for them all.




So, the market consists of 95% fundamental analysts and 95% of the market participants who are losing money are fundamental analysts.
Sooooo....the other 5% are chartists and they must represent the remaining 5% who are losing money....errr

What makes you think that all fundamental analysis is the same?  Is all charting the same?




rimtas said:


> Years, decades and centuries are passing by, but everyone is still sticked to the strategy that generates only losses.
> 
> I know many people who changed their view and started to look at charts instead, but do not know _anyone_, who threw charting in the bin and started with fundamentals instead.




When the fundamental people changed to charts they still had money.  No-one moved from charts to fundamental because they were toast before they figured it out.  Could be that busted chartists still with a credit line find fundamental all too hard but the reverse is not true?  Could be that books on charting and courses are more plentiful and cheaper than that for fundamental, making it much more accessible?  Could be that your group of people turn out to favour charting by mutual self selection.  Apart from interaction here, for example, I do not actually know a single chartist...and I know a lot of very serious investors.  Could be that when someone decided which method to choose they went alphabetically...



rimtas said:


> The chartist community is growing everyday, and they _make_ money, instead of  gambling by looking at balance sheets .




The chartist community is growing, and so it the fundamental community.  Both make money and both lose money.  Define gambling.

:couch:jerry:nunchux:    :

OK, I'm buggin' out.  That was a false flag operation (in that I also use price based signals, albeit of a different classification to what I have seen here, as part of my decision process.  What I do in this area would not normally be called charting though).  Let the festivities begin/continue!


----------



## ThingyMajiggy (17 October 2014)

My post earlier was serious, someone out there that knows fundamental analysis, let rip, I would genuinely love to know how you guys go about it. I wouldn't even know where to begin to trade fundamentally, mainly because my time frame is in minutes and I don't see how that's possible, but there are technical guys here who share a few things on how they go about it so let's have it fundamental guys, someone start a thread or something and do some trades, would be great


----------



## DeepState (18 October 2014)

ThingyMajiggy said:


> My post earlier was serious, someone out there that knows fundamental analysis, let rip, I would genuinely love to know how you guys go about it. I wouldn't even know where to begin to trade fundamentally, mainly because my time frame is in minutes and I don't see how that's possible, but there are technical guys here who share a few things on how they go about it so let's have it fundamental guys, someone start a thread or something and do some trades, would be great




Although it can, why must FA have to work in time frames of seconds or minutes to be valid?

As for posted trades, in 1962 I purchased this stock called Berkshire Hathaway...and I never drew a chart. Still haven't.


----------



## ThingyMajiggy (18 October 2014)

DeepState said:


> Although it can, why must FA have to work in time frames of seconds or minutes to be valid?
> 
> As for posted trades, in 1962 I purchased this stock called Berkshire Hathaway...and I never drew a chart. Still haven't.




It doesn't have to work in short time frames to be "valid", I'm just curious and never seen anyone trade that way, I'm just curious because that's the time frames I trade in, so was wondering if it was possible. Not really after if anyone does it in seconds and minutes anyway, I don't see how that's possible, but maybe days to a week or two time frames. 

Well that's good for you then


----------



## burglar (18 October 2014)

DeepState said:


> Although it can, why must FA have to work in time frames of seconds or minutes to be valid?
> 
> As for posted trades, in 1962 I purchased this stock called Berkshire Hathaway...and I never drew a chart. Still haven't.




"Chartless in Omaha"!


----------



## DeepState (18 October 2014)

ThingyMajiggy said:


> It doesn't have to work in short time frames to be "valid", I'm just curious and never seen anyone trade that way, I'm just curious because that's the time frames I trade in, so was wondering if it was possible. Not really after if anyone does it in seconds and minutes anyway, I don't see how that's possible, but maybe days to a week or two time frames.
> 
> Well that's good for you then




The biggest and most liquid market in the world by far is currency.  The below is an indication of the simplest strategies related to currency trading.  Not a single chart is required.  The rightmost chart is erroneous.  Focus on the left chart.  The three lines are 'factor' returns to the three most common currency considerations.  These have been the same factors in place for over two decades.  No charts are drawn.  This is a form of fundamental currency trading.  Risk management is a massive consideration on top of this, although you can see it has done fine anyway. Source is BIS (q4 2013) so it's not me printing something out.  I have my own data.  The world's largest currency traders are not chartists.  We know each other.  The retail market now makes up around 3% of trade and are largely chartists from anything I have seen from FX discussion groups to chat sites focussed on the matter. Fundamentals never come up at all unless Chris West needs to fill in time (he's a good guy...) and get a trade out of his audience.  If I raise a fundamentally oriented question the usual repose is "what the heck are you talking about?"  These institutions take money out of the rest of the market in aggregate, including retail.




The time frame for trading above is monthly.  In reality , it would rebalance with market moves unless implemented for an ETF which has to be very strict and simple.

Shorter horizon at the second to second level (or faster) would be arbitrage related.  These would be implemented by algo because it is too fast for a human reaction.  There are a great number of sub-classifications for strategies employed in this area.

There are other guys here who trade on an intra day basis who know a lot of fundamentals too and are clearly very successful.  They are amongst the hard-core professionals on the site.  I won't speak for them.


----------



## CanOz (18 October 2014)

Speaking of charts and funnymentals...does anyone know what this is? Can anyone give us a technical viewpoint?


----------



## CanOz (18 October 2014)

This is an awesome chart....tells an amazing story that no-one ever expected...


----------



## AverageJoe (19 October 2014)

DeepState said:


> The biggest and most liquid market in the world by far is currency.  The below is an indication of the simplest strategies related to currency trading.  Not a single chart is required.  The rightmost chart is erroneous.  Focus on the left chart.  The three lines are 'factor' returns to the three most common currency considerations.  These have been the same factors in place for over two decades.  No charts are drawn.  This is a form of fundamental currency trading.  Risk management is a massive consideration on top of this, although you can see it has done fine anyway. Source is BIS (q4 2013) so it's not me printing something out.  I have my own data.  The world's largest currency traders are not chartists.  We know each other.  The retail market now makes up around 3% of trade and are largely chartists from anything I have seen from FX discussion groups to chat sites focussed on the matter. Fundamentals never come up at all unless Chris West needs to fill in time (he's a good guy...) and get a trade out of his audience.  If I raise a fundamentally oriented question the usual repose is "what the heck are you talking about?"  These institutions take money out of the rest of the market in aggregate, including retail.
> 
> View attachment 59899
> 
> ...




Do you know why the largest currency traders don't use chart? 

It is because they are the market. They are the liquid providers ie. Major institutional banks that move funds on behalf of corporations between currencies.  I have only come across a "guru" who trades based on FA, Jarratt Davis. He claims to be the second most successful trader in the world. Yet he still flip a chart to look at levels and trade unleveraged. It took me a while to understand how to do it based on FA but then I realised he is unleveraged. Currencies unlike stocks do not go into admin. If you wait long enough it can come back and you would only lose the holding interest whether positive or negative depending on interest rate differentials.


----------



## DeepState (19 October 2014)

AverageJoe said:


> Do you know why the largest currency traders don't use chart?
> 
> It is because they are the market. They are the liquid providers ie. Major institutional banks that move funds on behalf of corporations between currencies.  I have only come across a "guru" who trades based on FA, Jarratt Davis. He claims to be the second most successful trader in the world. Yet he still flip a chart to look at levels and trade unleveraged. It took me a while to understand how to do it based on FA but then I realised he is unleveraged. Currencies unlike stocks do not go into admin. If you wait long enough it can come back and you would only lose the holding interest whether positive or negative depending on interest rate differentials.




Hi

The FX market turns over $5.3tr a day.  There is no single entity which is a significant part of it.  Hence, I believe, it is hard to claim that any entity is a systematic supplier or demander of liquidity for the main pairs.  From time to time, entities like central banks make intercede in a particular direction.  They may demand or supply liquidity from the perspective of a particular currency.  Variations in this are uncommon.

The commercials, or FX implemented on their behalf in relation to traditional trade, are a small part of the market.  The banks which make markets are levered.  The largest part of currency trade is financially motivated, which is two-way.

I'm not exactly sure what you mean in terms of unleveraged.  Maybe Davis was a spot trader only, moving funds into different currencies at spot with total gross notional equal to or less than his net portfolio value.  Or he did the same effective move via overlay.  If so, his portfolio value will never go negative.  It is also a highly unusual way to manage money in the land of FFX, which underlies my uncertainty with what has been said.

The largest insto managers operate with leverage on allocated funds.  The OTC market does not levy an initial or variation margin after initial credit checks are cleared.  Enormous leverage is therefore possible.  This leverage is applied. In addition, the institution, which may be a bank or hedge fund, can also be leveraged.  Hence solvency risk or, at least, liquidity risk in terms of having enough funds to hand to meet settlement obligations is a real issue.  Waiting for long enough is not an option in such circumstances as they are marked-to-market.

There is no reason why TA or FA can or cannot be used under conditions of leverage or not.  My observation is that the insto side favours FA.


----------



## skyQuake (19 October 2014)

AverageJoe said:


> If you wait long enough it can come back and you would only lose the holding interest whether positive or negative depending on interest rate differentials.




Waiting for parity




P.S. you can get them for about $5 on ebay! Then wipe your ass with it


----------



## pixel (19 October 2014)

CanOz said:


> This is an awesome chart....tells an amazing story that no-one ever expected...




Thanks for those charts, CanOz; 
It's true: both are awesome decade-long rising channels; the first chart is slightly unusual in that it could indicate a top reversal over the coming 4-6 years - depending on whether it moves away from the horizontal support or respects the channel bottom when it gets there in a year or two.

In both cases, however, I would love to see a similar channel study based on a semi-log price chart. Where multiple octaves and decade-long time frames are involved, the underlying moves are better seen in an exponential scale rather than a linear one.

PS: What are the instruments btw?


----------



## barney (19 October 2014)

CanOz said:


> ...does anyone know what this is?




Looks suspiciously like one of those things pictured below:  ... Nice looking notes they were too!

No technical viewpoint on it ... I'm not that clever

ps. Second chart = 30 year T-Bond or a derivative of it perhaps?


----------



## CanOz (19 October 2014)

Yes, well done Barney, on both counts...Yes Pixel some nice trends there...

No analysis needed, we dont need to try and predict anything as most seem to believe. But we do know that if the AUD break support we will have a bearish view for a period of time. If you know this, you can quantify your risk and take a trade if the reward is worth it.

Charts are only a means to see the opportunities, form an opinion, or a bias. With currencies, the macro fundamentals can also give some confluence to a trade idea....

Charts can either be this for you, or just an idea what the price has done. If your profitable then no0one can argue with you if they're useful or not...

CanOz


----------



## AverageJoe (19 October 2014)

DeepState said:


> Hi
> 
> The FX market turns over $5.3tr a day.  There is no single entity which is a significant part of it.  Hence, I believe, it is hard to claim that any entity is a systematic supplier or demander of liquidity for the main pairs.  From time to time, entities like central banks make intercede in a particular direction.  They may demand or supply liquidity from the perspective of a particular currency.  Variations in this are uncommon.
> 
> ...




I am not sure if you trade FX but the leveraged are 200-1 to as high as 3000-1, Very small margin of deposit 'punt'. I am not saying FA doesn't play a part in directional bias but price is very technical, precise and can respect support/resistance to the pip often. The growth in FX trading has seen a phenomenal rise and brokers these days are offering ECN type liquidity with very tight spread. 

We can go on discussing who provides the liquidity and which CB manipulated their currency but for me the focus remains making money. We retail traders do not have the fire power to move markets so I like to take positions in the preference of the so called smart money or insto players. I trade with high leverage so I do not have the comfort to analyse FA. Most research are usually based on rubbery figures unlike looking at the Fin statements of individual listed companies. 

So in this respect I treat outcome of market reactions as random in nature. I am only looking at the risk reward ratio when I get a trade setup and nothing else besides the money management etc. 

There are plenty of strategies and chart patterns to indicators to magic ratios and one takes what works. Personally I only find raw charts with a few horizontal lines works for me as I want to strip out the noise of math indi that can have unwanted influences. 

I often read with amusements about stop hunting by brokers and in most cases I reckon it is a raiding levels by the smart money. I believe that this often happens when the underlying bias regarding a certain piece of high impact news are pretty much "known' and the raiding is often where the greatest amount of liquidity sits before price is taken in the direction these smart money wants to take. I will very often try to play this type of 'raiding',  as a swing trader, on the minute timeframe, zone time based of course.

I migrated from stock trading and they are 2 different beast in their own right. Good luck in the journey.


----------



## AverageJoe (19 October 2014)

skyQuake said:


> Waiting for parity
> 
> 
> 
> ...




Holy Crap! I bought my 100Bil from Ebay I paid more for that then the Trillion note! My investment is def going backward! LOL If I maintain it in good condition for say 500 years, the grand (power of nth) kids might be a zillionaire one day.


----------



## pixel (19 October 2014)

skyQuake said:


> Waiting for parity
> 
> 
> 
> ...




Wowee! 
... and doesn't the picture on that bank note instil "con"fidence in the Zimbabwe Dollar. "Rock"solid indeed.


----------



## lesm (19 October 2014)

AverageJoe said:


> I am not sure if you trade FX but the leveraged are 200-1 to as high as 3000-1, Very small margin of deposit 'punt'. I am not saying FA doesn't play a part in directional bias but price is very technical, precise and can respect support/resistance to the pip often.




Or it can be assumed that the fundamentals have already been factored into the price. Whether fundamentals lead or lag the price is a separate topic in its own right.



AverageJoe said:


> We can go on discussing who provides the liquidity and which CB manipulated their currency but for me the focus remains making money. We retail traders do not have the fire power to move markets so I like to take positions in the preference of the so called smart money or insto players. I trade with high leverage so I do not have the comfort to analyse FA.




Understanding market structure, which only a relative small number of retail traders take the time to study or familiarise themselves with, is a separate matter. Using spot FX as an example, you can consider the Fed (US) central banks (CBs) down through Tier 1 instos, with retail traders being at the bottom of the food chain. Following the Smart Money is one way for retail traders to make money, if they can recognise when they are chasing volume.




AverageJoe said:


> There are plenty of strategies and chart patterns to indicators to magic ratios and one takes what works. Personally I only find raw charts with a few horizontal lines works for me as I want to strip out the noise of math indi that can have unwanted influences.




Yes, follow the KIS principle. Some charts, lead to sore eyes, look more like works of abstract art and the price is lost amongst the noise created by the indicators or even patterns being documented in the chart. Trading doesn't really need to be as complicated as some make it out to be.



AverageJoe said:


> I often read with amusements about stop hunting by brokers and in most cases I reckon it is a raiding levels by the smart money. I believe that this often happens when the underlying bias regarding a certain piece of high impact news are pretty much "known' and the raiding is often where the greatest amount of liquidity sits before price is taken in the direction these smart money wants to take. I will very often try to play this type of 'raiding',  as a swing trader, on the minute timeframe, zone time based of course.




The old chestnut, always easier to blame someone else, rather than accept things for what they are. Stop sweeping has been around for ages and will continue. The retail trader is  really just collateral damage, plus the way they use TA, their stop placement is predictable. Sweeps will take a large number of retail traders out every time.


----------



## AverageJoe (19 October 2014)

lesm said:


> Or it can be assumed that the fundamentals have already been factored into the price. Whether fundamentals lead or lag the price is a separate topic in its own right.
> 
> 
> 
> ...




I would be interested in your trading strategy. You read as one who has much experience and success in the FX game.


----------



## DeepState (19 October 2014)

Hi AJ

Thanks for the response.  Much appreciated.



AverageJoe said:


> I am not sure if you trade FX




Just a few yards here and there.  Though I mean it when I say, "not much in the scheme of things".



AverageJoe said:


> ...but the leveraged are 200-1 to as high as 3000-1, Very small margin of deposit 'punt'. I am not saying FA doesn't play a part in directional bias but price is very technical, precise and can respect support/resistance to the pip often. The growth in FX trading has seen a phenomenal rise and brokers these days are offering ECN type liquidity with very tight spread.




With the above, I now understand what you mean by not leveraged.  I'll take it to mean not extremely leveraged.  We are then on the same page in terms of FA/TA.  When your margin for error is pips, forget about FA.  It's just too blunt.  

You're right that retail margins are coming right in as volumes and competition are growing.  There is not really any change going on in insto right at present.  However, and this is big, there is a move on to collateralize into variation margins in the US.  More or less treat them as retail in this regard.





AverageJoe said:


> We can go on discussing who provides the liquidity and which CB manipulated their currency but for me the focus remains making money. We retail traders do not have the fire power to move markets so I like to take positions in the preference of the so called smart money or insto players. I trade with high leverage so I do not have the comfort to analyse FA. Most research are usually based on rubbery figures unlike looking at the Fin statements of individual listed companies.
> 
> So in this respect I treat outcome of market reactions as random in nature. I am only looking at the risk reward ratio when I get a trade setup and nothing else besides the money management etc.
> 
> ...




I totally respect the approach in the larger sense.  The details are unique to yourself.

If you don't have the space to use FA, then I'll ask the usual questions:
1. Why should TA work when everything wants the same as you...to make money?  Every pattern known to mankind would have been tested, wouldn't it?
2. Why do you think that the predictive ability of TA is actually superior to FA? LESM has suggested that setting FA aside could arise from the belief that all FA considerations have been priced (I don't think you actually said this explicitly).  Why not TA?
3. Given you trade with high leverage, how do you risk manage?



AverageJoe said:


> I migrated from stock trading and they are 2 different beast in their own right.



Yep...what they have in common is that they are both still beasts.



AverageJoe said:


> Good luck in the journey.




I hope yours is awesome.


----------



## AverageJoe (19 October 2014)

DeepState said:


> I totally respect the approach in the larger sense.  The details are unique to yourself.
> 
> If you don't have the space to use FA, then I'll ask the usual questions:
> 1. Why should TA work when everything wants the same as you...to make money?  Every pattern known to mankind would have been tested, wouldn't it?
> ...




Hi RY,

I don't totally ignore FA, just don't put much attention to it except to see the general direction of bias.
So presently as the best example, it can be clearly seen that the USD buying has been super bullish lately. I do not speculate on the actual reasons for my trade directional bias but I see it in all the major FX pairs. Take AUDUSD for example, if I flip a monthly chart the trend is still very much bullish but on the daily it is definitely collapsing. I am looking for all the resistance level to look for shorts and not going against this bearish momentum, make sense right. However if I flip the 1H charts, there are plenty of opportunities to take a long trade intraday or even shorter time frame. So the 1H or less time frame charts FA is not going to help me but a combination of surviving the stops in pips and any Australia news will be the prime focus. 

I will also put on trade setups on the daily TF and price action are all factored in as to why it is falling. Presently daily is just in a block of chop so no setup there personally in either direction. Should it break out to the upside then it is natural to trade with the down trend and look for reversal setup to join this bear trend. If it break out downside, I would look to play a continuation short.

If you recall I believe price or markets has a randomness about it. In other words just because a pattern or level has worked in the  past DOES NOT necessarily means it will be repeated in its predictability going forward. It just has a better probability of working again, that's all. In this respect I do not use or have faith in Harmonic patterns (butterfly, gartley, etc) of any of the more conventional patterns (ascending/descending triangles etc) nor do I use fib levels except as a confirmation tool. Neither do I use any of the Maths indi (MACD, RSI etc) or moving averages. You may ask what do I use? The answer is nothing much, just raw candlestick chart with a few support/resistance lines and I pay attention to supply/demand zones. 

I measure a setup in terms of risk reward ratios and I will try and stack the odds in my favor then fire. The rest is up to the traders after my order has fired to decide the fate of that trade. Out of my control besides risk which I have already applied using conventional money management. I do not know whether the trade will be profitable even though it has worked in the past because the number and types of traders will vary and also economic/political conditions are different.

I manage risk by preset stop loss and predefined take profit level/s. Depend on the time frame charts I will not open trades before key events like NFP FOMC Draghi's speech nor do I trade say 5/15/1H charts before RBA rate decision. These news reactive volatility are just unpredictable because if the stops are tight, price can take you out while your directional bias is till correct. 

In my previous experience trading leveraged CFD stocks, stop loss can never protect a trade on the defined risk. The gaping nature of pre-auction means that price can open below a stop loss level which will mean the fill is randomly worse off. FX gaping day is once a week on an early Monday morning in AUS (NY open). No trading halt in FX and there is usually a price taker on the other side if I want to close out without any or much slippage unless I play the post news action. 

That is my KISS system.


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