# Technical Analysis vs. Fundamental Analysis



## champ2003

If you want to make money in the market i recommend forget the fundamentals and look at the trend. The trend is your friend. 

I always find it interesting watching people as they look heavilly into the fundamentals of a company only to find that they miss the boat. On the other hand fundamentalists commonly make the mistake of calculating a companies worth only to find that the market doesn't agree with it therefore the trend never takes them to that expected market price anyway. 

The trend is your friend is the key to remember if you want to make any money out of the market. It's important to learn how to understand the trends though. 

Cheers!


----------



## TheAnalyst

*Re: HDR - Hardman Resources*



			
				champ2003 said:
			
		

> If you want to make money in the market i recommend forget the fundamantals and look at the trend. The trend is your friend.
> 
> I always find it interesting watching people as they look heavilly into the fundamentals of a company only to find that they miss the boat. On the other hand fundamentalists commonly make the mistake of calculating a companies worth only to find that the market doesn't agree with it therefore the trend never takes them to that expected market price anyway.
> 
> The trend is your friend is the key to remember if you want to make any money out of the market. It's important to learn how to understand the trends though.
> 
> Cheers!




Thats people who dont understand how to use fundamentals.........and relate them to a company........I actually rely on both fundamentals and charting. All my trades today were first and foremost about understanding the fundamantals and then all my entry and exit points rely heavily on charts.


----------



## champ2003

*Re: HDR - Hardman Resources*

Oh ok. Great!


----------



## TheAnalyst

*Re: HDR - Hardman Resources*



			
				champ2003 said:
			
		

> Oh ok. Great!




Read this....its the fundamentalist analysts that actually set the trends...lol

Check out my posts on the mbl thread from yesterday...i said it before them and i jumped off and took a loss yesterday as i was like the rest of em and anticipated if it was an extremly good earnings above the last one i would get a trend ride...but check out the trend now created by fundamentals.



> Analysts downgrade MacBank
> From: AAP
> February 02, 2006
> 
> MACQUARIE Bank suffered downgrades from brokers today who raised questions about its earnings forecasts and the investment bank's plans to roll out new specialist funds.
> 
> Shares in Macquarie Bank (mbl.ASX:Quote,News) dived yesterday after it made only a minor upgrade to its guidance and revealed that a number of major floats will miss out on inclusion in this financial year, ending March 31.
> 
> Macquarie now expects an annual net profit "slightly up" on the record $823 million in 2004-05.
> 
> Goldman Sachs JBWere analyst James Freeman pulled back his forecast for annual net profit by 10 per cent to $875 million, with further downgrades to the following two financial years.
> 
> Mr Freeman questioned whether Macquarie (mbl.ASX:Quote,News) would be able to achieve its plans to spin off about $1.8 billion worth of assets currently on its balance sheet into new specialist funds over the coming months.
> 
> These include a long-awaited Korean infrastructure fund and the float of explosives company Dyno Nobel in Australia, both of which were previously anticipated to have occured by the end of March but will now likely take longer.
> 
> He pointed to challenges such as rising bond yields and the underperformance of Macquarie's funds such as Macquarie Airports and Macquarie Infrastructure Group, which has wiped off all their performance fees in the second half.
> 
> "We believe these issues could see Macquarie struggle to get its target of $1.8 billion of assets off balance sheet over the six to seven months; or alternatively it could see Macquarie sacrifice the price at which these assets are sold," Mr Freeman said.
> 
> He also said there was a risk Macquarie could continue to miss out on performance fees, which would reduce net profit by about $50 million or five per cent in 2006-07.
> 
> UBS analysts also downgraded their earnings forecasts for Macquarie, partly due to weaker trading conditions and partly due to the delays in the new specialist funds.
> 
> "This may have the effect of pushing other transactions further out the pipeline, potentially leading to a slowdown in the specialist funds model rollout," the analysts wrote.
> 
> But they said underlying investor demand remained reasonably strong.
> 
> "We see the recent (share) price weakness as a good buying opportunity," they said.


----------



## willow

*Re: HDR - Hardman Resources*

Just left another forum after a witchhunt over this same issue that  I wanted no part of. A mother superior with a little funny unintelligable man that follows her around had finally thought she found a victim to crucify and poor old me had copped the worst personal attack I can remember for a long time. There seems to be people going well using either or both types of analysis I believe. Jack Schwager has interviewed both types and has come to the conclusion it is a personal choice on what is effective and comfortable for the individual. I myself prefer a technical approach. Cheers.


----------



## TheAnalyst

*Re: HDR - Hardman Resources*

Usually people who dont have a business type of degree or fall short in maths and statistics ability prefer technical analysis and people with accounting backgrounds and stuff get an early grasp of the maths and statistics in the market and the pricing models mixed with economics and then go on and do technical analysis as well......and become good like me....


----------



## Rafa

*Re: Technical Analysis vs Fundamental Analysis*

actually there is a higher level of maths in technical analysis than in fundamental analysis...

fundamental analysis (and accounting) is just addition, subtraction, multiplication and division, the stuff you learn in primary school...

technical analysis is actually using pure maths (waves, fractals, pattern recognition techniques) the stuff you need to be bloody smart to work out...

(i thought i was on the HDR thread.. what is going on!!!)

Ah.. it looks like it got moved... well done moderator.. it was going off topic!


----------



## Joe Blow

*Re: Technical Analysis vs Fundamental Analysis*



			
				Rafa said:
			
		

> (i thought i was on the HDR thread.. what is going on!!!)




Rafa,

This discussion was taking the HDR thread off on a tangent that I could see going on for some time, so I simply split the thread so the HDR thread could stay on-topic.


----------



## Rafa

*Re: Technical Analysis vs Fundamental Analysis*

your a smart bugger Joe Blow!!!


----------



## TheAnalyst

*Re: Technical Analysis vs Fundamental Analysis*



			
				Rafa said:
			
		

> actually there is a higher level of maths in technical analysis than in fundamental analysis...
> 
> fundamental analysis (and accounting) is just addition, subtraction, multiplication and division, the stuff you learn in primary school...
> 
> technical analysis is actually using pure maths (waves, fractals, pattern recognition techniques) the stuff you need to be bloody smart to work out...
> 
> (i thought i was on the HDR thread.. what is going on!!!)
> 
> Ah.. it looks like it got moved... well done moderator.. it was going off topic!




Hi rafa

Accounting has changed at it has now gone off into specialised areas...it aint just BODMAS anymore...what i am saying with tech analysis you usually find the formulas given in the books where as real business degrees you go to uni and if you like finance you go heavy on economics and stuff and do finace maths and statistics actually you have to do a specialised subject on it now.

I started off doing tech analysis and then realised i wanted to know business fundamentals and that has helped me heaps...i combine both...i have always seen sound business fundamentals is what the share market is based on and these set the trends and different times for different stocks and find when stocks begin to move from them it gets riskier and costly some time there after.

When i traded dot coms i relied totally on tech analysis i would actually sit with tech analysis books ready to reference patterns and trends as soon as they apeared and hey it worked even on the way down....the mining sector is now behaving like this as well patterns forming fast right before your eyes actually so many you just cant work out which ones to jump on or which one will go off with a bang next.

I noticed something else the other day in a business paper the analyst section of a broking house sent a junior worker out to give views on the best mining picks to the business paper and i reckon they were laughing at him and so am i because mining stocks are valued on NPV in other words they use the life of the mine until its resources are full consumed and shareholders should get their money back over time or if you have been there from the beginning a lot better...but this guy from the analyst section qoted picks based on p/e of them...now this is incorrect because the p/e's actually were just an occurence from the NPV's that naturally occurred from this calculation. Now there are a lot of people out there who have been reading all about p/e's which are deprived thru fundamental analysis now these stocks had low p/e's real low and they were not valued on p/e but on the life of there resource and they would have gomne out and bought and this would have given signals on the charts.

The brokers didnt care they didnt say it but they have profited from it, This same behaviour occurred during dot com.

The mining sector is now shooting off and it is now starting to  defy business fundamentals and valuations and you should know what that will mean in the end?? dot coms did the same they moved from sound business fundamentals and anticipation on future earnings so future earnings became became the price models for a while and then bang it happpened so fast.


----------



## wayneL

*Re: HDR - Hardman Resources*



			
				willow said:
			
		

> Jack Schwager has interviewed both types and has come to the conclusion it is a personal choice on what is effective and comfortable for the individual. I myself prefer a technical approach. Cheers.




Well done Willow

This encaspulates the argument in a single sentence. 

Both types of analysis work well, depending on the trader, time frame, etc.


----------



## 123enen

*Re: HDR - Hardman Resources*



			
				TheAnalyst said:
			
		

> Read this....its the fundamentalist analysts that actually set the trends...lol




Do the trend followers agree and believe this ?

I am more fundamentalist than trend. If it was all about trend we wouldn't need announcements. If a stock is trending down then what breaks the trend - perhaps a positive announcement?
The trend changes when sellers take dominance over buyers , or visa versa. And what can cause this to happen. I suggest something fundamental. 

I suspect that most people looking at mining stocks for example are waiting primarily on feasibility studies and drill reports and other hopeful fundamental news, and secondly look at trend changes. 
Would you go into a mining stock that is trending upwards if the company just released bad news?

The trend people scoff at the fundamentalist approach but are they really following the fundamentalists who may have just changed the trend?

But I say this because I probably understand fundamentals and value better than I understand MACD or whatever and RSI, which I get from typing too much. I am trying very hard to use both and I am getting better at charting.  But for me, fundamental first and charting (not just trend) to confirm.


----------



## michael_selway

*Re: HDR - Hardman Resources*



			
				wayneL said:
			
		

> Well done Willow
> 
> This encaspulates the argument in a single sentence.
> 
> Both types of analysis work well, depending on the trader, time frame, etc.




Yeah kind of 

But i think fundamental is more accurate. For example if u were a chartist

Would u buy something with a P/E of 100+ but the trend was "a good up" one? eg Google just before the recent falls?

Besides fundamental and technical, the 3rd element is psychological.

A share could have a great "uptrend", great "fundamentals", but people may still not buy it, thats the thing, and sell. Eg a sudden terrorist attack, Sars which may last a long time, eg. 2001-2002 Bear Market.


----------



## Milk Man

*Re: Technical Analysis vs Fundamental Analysis*

Where is Mr Radge in this debate? He sums up the matter pretty well. 

Anyway, IMO its sentiment that drives the market. The reasons people buy and sell stocks are limitless; good earnings prospects, good charts, what Warren Buffet had for brekky, was the moon tipped up last night (if you follow gann  ). From my perspective the best way to make a profit is to devise a system that works when backtested, and works when traded real time.


----------



## TheAnalyst

*Re: Technical Analysis vs Fundamental Analysis*



			
				Milk Man said:
			
		

> Where is Mr Radge in this debate? He sums up the matter pretty well.
> 
> Anyway, IMO its sentiment that drives the market. The reasons people buy and sell stocks are limitless; good earnings prospects, good charts, what Warren Buffet had for brekky, was the moon tipped up last night (if you follow gann  ). From my perspective the best way to make a profit is to devise a system that works when backtested, and works when traded real time.




Mr Radge actually has trained himself to pick up the changes in the fundamentals of a stock by certian patterns and statistics in charts and the reliabilty of those patterns to give more winning trades than losing or lots of small losses and a good few big gains and to come out in profit overall.....now i aint knocking him here as i think he does a good job and i think i can use his stuff but i also think he can use my stuff as well but the same good be done with fundamentals...take BSL look at the sudden drop from the sudden high..now i had the warrants and soon as that big gap appeared i was out of there that day...why? because the chart indicated to me that it was over bought and due for a correction but fundamentally with a net profit this year forecasted to be 96.8 cents per share even with a p/e of 10 that makes it cheap at $9.68 a share even ex div but this stock at responding to this it is responding to other fundamentals and thats the decreased profits due to the increase in raw materials for resources...now at the moment it has landed on a trend line and filled a gap and i want in and tryed to today and couldnt get those warrants cheap enough right on close then missed out...but what was i doing???.....i know that the last profit downgrade only took in to account the recent rises in raw material costs....see fundamentals...but it has not taken into account the surprising rises in material costs that other analysts forecast and were under on the actual sharp increases to be.

Now whats this gonna do to profits for BSL???? see the technical analysts dont see this on the chart and they didnt know of the takeover roumers so now what does a fundamentalist do.....has to go and add the increased prices from the inputs that BSL uses to manufature their steel and lessen the profit. See fundamentals once again changed the trend...now what is BSL's potential new high and new low that the fundamentalist condsiders as a trading range this is what i am after now...but i dont have access to the actual BSL accounts and all the ledgers but analysts from institutions do and they already have a rough idea what it may be.

What about the jump in price before the take over rumour??? see it wasnt charts it was the fundamentals of what a takeover does to a share price...just slap 20-40% on the top and thats the price.


----------



## Knobby22

*Re: Technical Analysis vs Fundamental Analysis*

Both methods work but the rewards for both depend on how much effort and thought you put in.
A lazy investor who says he is using fundamentals is often just guessing as he hasn't really understood why he is buying. Likewise a trader who trades technically but doesn't put in effort is just gambling.


----------



## bullmarket

*Re: HDR - Hardman Resources*

oh dear   

each to their own I guess.



			
				champ2003 said:
			
		

> If you want to make money in the market i recommend forget the fundamentals and look at the trend. The trend is your friend.
> 
> I always find it interesting watching people as they look heavilly into the fundamentals of a company only to find that they miss the boat. On the other hand fundamentalists commonly make the mistake of calculating a companies worth only to find that the market doesn't agree with it therefore the trend never takes them to that expected market price anyway.
> 
> The trend is your friend is the key to remember if you want to make any money out of the market. It's important to learn how to understand the trends though.
> 
> Cheers!




I'm in the camp that uses both fundamental and technical analysis.  I look at company fundamentals/valuations first to see if the company is worth following in the first place, and if it is and I decide to buy some shares then I go have a look at its chart to help time buying points.  But please note, I am an investor and not a trader.

I wonder how many in here arguing the uselessness of fundamental analysis would be prepared to tell the likes of Warren Buffet that him looking at fundamentals is a waste of time.  My guess is that his reaction would most likely be to laugh at them and then ask them what they thought they were doing that was better and more profitable than what he was doing 

I'm sure there are many very successfull and wealthy traders and investors out there who use fundamentals and most likely some technical analysis as well.

Both concepts have their pros and cons imo and so why not enjoy the benefits of both worlds.  But it's horses for courses and how/what you use depends largely on your objectives and risk tolerances.

cheers

bullmarket


----------



## happytrader

*Re: Technical Analysis vs Fundamental Analysis*



			
				Knobby22 said:
			
		

> Both methods work but the rewards for both depend on how much effort and thought you put in.
> A lazy investor who says he is using fundamentals is often just guessing as he hasn't really understood why he is buying. Likewise a trader who trades technically but doesn't put in effort is just gambling.




Hi knobby I totally agree that both methods work no doubt about it.

However, I think the biggest myths I have ever heard and once believed is that one must work hard for money. If you keep doing the right thing and responding the right way reliably there is no reason either method won't work well. As a technical analyst I've already done the hard yards in that department. My part now is to just say 'yes' when I see the right setup at the right time. 

Yes I admit to the outsider it looks lazy especially when you see the abundance of trading information, courses and books. One would assume you need a degree. But honestly knowing all that stuff makes no difference to my bottom line. 

People actually think and talk with forked tongues. In my profession when dealing with people we are taught to think objectively, which means you listened to what the person said, which was subjective but you also took notice of what you observed which is objective. The two are actually separate.

I imagine a great fundamentalist does this and is excellent at reading between the lines and observing for events and figures that support his beliefs.

Every excellent trader I know has an indepth knowledge of themselves and their inner motivations.  I notice Nick Radge mentions he visited a psychologist for issues that must have effected his trading outcomes. This is a common scenario for self sabotaging traders. I also know it often has to do with a trust or an "I don't deserve it"  issue that usually has it roots in childhood. Usually unconscious. Old programming.

Cheers
Happytrader


----------



## wayneL

*Re: Technical Analysis vs Fundamental Analysis*

I fail to see why traders must bag each others method. Perhaps this is rooted in a degree of uncertainty in their own method? ///trying to convince themselves more than others?

I'm comfortable with my own method...and I'm comfortable that f/a works well for others.

We can pick holes in each other till the cows come home, but in the end, what works is real.

There are trends in all time frames... from 1 minute bars to monthly bars. As far as who makes the trend...don't care! I'm just here to ride them.

Folks, this is a futile argument because cause "never the 'twain shall meet"


Micheal



> "Would u buy something with a P/E of 100+ but the trend was "a good up" one? eg Google just before the recent falls?"




That would depend on the time frame. As a daytrade, most certainly. As a medium term trend trade, certainly not, as the more a trend develops, the worse the risk/reward ratio becomes. The trend is indeed your friend, *until it ends*. I want trends in their infancy, not in their dotage.

Cheers


----------



## ctp6360

*Re: Technical Analysis vs Fundamental Analysis*

Happytrader that last post of yours is pure brilliance and corroborates everything I have been reading lately, thankyou very much for your insight - it is great to hear from someone who has APPLIED these techniques...


----------



## TheAnalyst

*Re: Technical Analysis vs Fundamental Analysis*



			
				ctp6360 said:
			
		

> Happytrader that last post of yours is pure brilliance and corroborates everything I have been reading lately, thankyou very much for your insight - it is great to hear from someone who has APPLIED these techniques...




Didnt you like my overview as well?? I put a lot of effort into that.


----------



## ctp6360

*Re: Technical Analysis vs Fundamental Analysis*

Oh yes absolutely I did TheAnalyst! The problem is, because I haven't learnt much about the fundamentals yet myself I find myself lost when I read your analysis simply because of my own lack of basic knowledge on this method of analysis.

However, I have been reading your posts closely - especially the flurry of them you wrote yesterday, I have been trying to combine yours (and others) comments with what I am learning and what I observe from graphs to see if I can correlate people's ways of thinking to my own learning.

So sorry if I gave the impression I overlooked what you wrote, it was just that Happy hit right on what I have been reading and digesting the last few days so I could relate to it in a more concrete way, I hope this explains things


----------



## wayneL

*Re: Technical Analysis vs Fundamental Analysis*

Found this and thought it was good:



> The fundamentalist studies the cause of market movement, while the technician studies the effect.


----------



## wayneL

*Re: Technical Analysis vs Fundamental Analysis*

The tuth about earnings?

http://www.financialsense.com/Market/crap.htm


----------



## TheAnalyst

*Re: Technical Analysis vs Fundamental Analysis*

Lets have a worked example on the subject while we are here....lets look at MBL and RIO....how do you people think the share price of RIO will react today considering it seems as though it may have priced itself ahead before the full year earnings report came out and its price was reacting more aggressively bullish than say MLB. I was in both trades over a week ago i made money out of RIO but lost on MLB installment warrants...I chose to jump off RIO two or three days ago and take a almost 20% profit in a week and took a 15% loss on MLB in about a week and a half......fundamentals were what drove me into both stocks and the fundamentals were what drove the dynamics of the share price.


----------



## markrmau

*Re: Technical Analysis vs Fundamental Analysis*



			
				wayneL said:
			
		

> http://www.financialsense.com/Market/crap.htm




That is what I don't understand. Why is it that from about 1992 onwards, the US market seemed happy with PE's mostly above 20 and a yield below 3%.

You could only argue that this is a true valuation if a huge increase in earnings was just around the corner (say doubling of earnings in the next couple of years). However, this was obviously not true from 1992-present. Alternatively, yields could be even worse for other investments, but this has not been consistantly true over that whole period either.

Yield looks almost as bad as sydney real estate.


----------



## willow

*Re: Technical Analysis vs Fundamental Analysis*

I'd like to also thankyou Happytrader and every other poster, my spirit has been down somewhat lately and your post Happytrader has managed to help give me back something  I had lost. Cheers Willow


----------



## Nick Radge

*Re: Technical Analysis vs Fundamental Analysis*

Fundamental or technical, two things are required regardless:

(1) A positive expectancy,
(2) A trend.

Every trader, regardless of method or time frame, requires a trend of some description in order to profit.

Profitable trading can be summarised as:

1. Find something that works
2. Validate it
3. Do it

TA tends to get discarded by academics becuase they study the outcome of particular patterns or situations without the positive expectancy angle. Add in positive expectancy and tossing a coin is profitable.


----------



## Julia

*Re: Technical Analysis vs Fundamental Analysis*



			
				TheAnalyst said:
			
		

> Lets have a worked example on the subject while we are here....lets look at MBL and RIO....how do you people think the share price of RIO will react today considering it seems as though it may have priced itself ahead before the full year earnings report came out and its price was reacting more aggressively bullish than say MLB. I was in both trades over a week ago i made money out of RIO but lost on MLB installment warrants...I chose to jump off RIO two or three days ago and take a almost 20% profit in a week and took a 15% loss on MLB in about a week and a half......fundamentals were what drove me into both stocks and the fundamentals were what drove the dynamics of the share price.




Yes, and then there is the "overall market sentiment" like late yesterday and today where most stocks are in the red.

Could some TA people say if they consider this when deciding to sell or hold on.  e.g. you have a stoploss on company XYZ which is triggered by the overall downturn of the market.  Do you sell anyway and possibly buy back in if uptrend is re-established or more or less ignore your stoploss in the light of what is likely to be a temporary downturn?  If you always heed your stoploss regardless of the fundamental situation, doesn't this incur an excessive amount of brokerage if you are trading frequently?

Julia


----------



## ctp6360

*Re: Technical Analysis vs Fundamental Analysis*

Bloody good question Julia, thankyou very much for asking it! My stop loss is very close to being triggered because of yesterday's downturn and although I plan on following it religiously simply for the dicipline of it, I wonder what the experts would do in this situation....

Given that its obvious that as a whole the entire market went down yesterday and it wasn't this particular stock's bad day to go down, should we exercise discretion and wait for it to fix itself? Or is that silly given that it is the market sentiment which is ultimately going to drive the price up or down anyway - perhaps a stop loss triggered in this case should be followed MORE religiously?

Some insight from the experts on this would be wonderful!


----------



## Dutchy3

*Re: Technical Analysis vs Fundamental Analysis*

Hi Everyone

I stick to my STOP. 

Now ... if I am getting stopped out due to overall market conditions then my stops are too tight. If I need to use wider stops, then I will also need to reduce my position size. Makes sense, market starts to misbehave, reduce exposure.

STOP's are placed at the logical swing low points, always protected by the most recent BIG WHITE. If a BIG WHITE is taken out by a swing down, market conditions or not, I have to question why I'm continuing to hold the stock.


----------



## bullmarket

*Re: Technical Analysis vs Fundamental Analysis*

Hi Julia

I suppose if your trading plan includes when and how to set stop losses then you should imo stick to your plan, even if it's only to just maintain discipline and so not let emotions (the old fear and greed) take over and influence decisions.

But having said this remember that ideally stop losses should in the long run preserve more of your capital, by getting you out of bad trades early, than what you may lose through brokerage and a few up-ticks in price if the share price rebounds at or soon after being stopped out.  

But if you find you are being stopped out too often then maybe consider reviewing when and how you set stop losses and postion sizes as Dutchy3 suggested.

Bear in mind I am not a trader so this is just my   worth.

cheers

bullmarket


----------



## Julia

*Re: Technical Analysis vs Fundamental Analysis*

I wasn't actually asking what I should be doing.  I'm just interested in whether people who take a purely technical approach allow themselves the leeway of considering various fundamental factors like general market downturn at any given time.

Nick, thank you for your earlier post which I have absorbed.  If you could comment on my question re TA flexibility or otherwise, I'd appreciate it.

With thanks.

Julia


----------



## Nick Radge

*Re: Technical Analysis vs Fundamental Analysis*

Julia,
I operate several accounts and styles, so I'll address what I tend to do and offer a sugestion for your dilemma.

My superfund is strictly buy and hold. I am an accumulator of quality and my time frame is 20-years+. I focus on a stock and with each salary sacrifice I buy some. If it moves too far in my favour, then I focus on another one. And the process goes on. I tend not to add if they go up sharply unless they show siginificant long term potential. An example is IVC which I started buying at $2.25. Once it got past $2.75 I stopped, then decided the upside was much more. If it dips below $3.50 again then I'll step back up. A key component I look at is the total shareholder return over the last 10-years (although IVC hasn't been around that long). I will only exit a position if the company stops paying a dividend or I think they will go under. PBB was one I exited because I thought/think there may be a risk of them going under. 

With trading, I use a different entity and a different game plan. When my stop is hit - I'm out. No second thoughts. No adjustments. No if's or but's. I'm out. I can always re-enter if prices start moving in my direction again. You always have that choice. Letting a loss run does two damaging things:

(1) It obviously skews the win/loss ratio the wrong way. You must remember that trading is about capital gain, not income growth. You never put your capital at more risk than is acceptable. *Your mind will do everything it can to keep you in a bad trade and get you out of a good trade.* Discipline is the core ingredient and there is no harm in having another go if prices go back again. But after 20-years of trading you will learn that sometimes prices will *never* go back. Look at MGW, PPX, PBG, IIN, WYL, PBB etc etc. These are top quality companies that kept diving and diving. I haven't even suggested HIH, ION, SGW, ONE, etc etc. From a _trading_ perspective, holding these beyond reasonable risk will take you out of the game.

(2) Allowing a bad trade to go further than your anticipated stop, then seeing it come back will create negative reinforcement. Do it once, and becomes easier the second time and so on. One day, it just won't happen again and you're out of the game. The sub-consious psychological damage will eventually harm you.

Bottom line: set the stop BEFORE you enter the trade and never, ever amend it backward. You can always re-enter. The market will always offer opportunities. Why do damage to precious capital for the sake of ego?

Nick


----------



## michael_selway

*Re: Technical Analysis vs Fundamental Analysis*



			
				Nick Radge said:
			
		

> Letting a loss run does two damaging things:
> 
> (1) It obviously skews the win/loss ratio the wrong way. You must remember that trading is about capital gain, not income growth. You never put your capital at more risk than is acceptable. *Your mind will do everything it can to keep you in a bad trade and get you out of a good trade.* Discipline is the core ingredient and there is no harm in having another go if prices go back again. But after 20-years of trading you will learn that sometimes prices will *never* go back. Look at MGW, PPX, PBG, IIN, WYL, PBB etc etc. These are top quality companies that kept diving and diving. I haven't even suggested HIH, ION, SGW, ONE, etc etc. From a _trading_ perspective, holding these beyond reasonable risk will take you out of the game.
> 
> 
> Nick




Very well said, 

if stocks overshoot, its possible that they may have reached a *"point of no return"*, where even long term wise, they will find it very difficult to ever reach that all time high again. 

PS:How long from now do u think MBL will reach $78 again?

Thx

MS


----------



## markrmau

*Re: Technical Analysis vs Fundamental Analysis*



			
				Nick Radge said:
			
		

> *Your mind will do everything it can to keep you in a bad trade and get you out of a good trade.*



Amen. 

It's incredibly hard to stop your mind playing tricks on you. You keep thinking back to the company you took a stop loss on, only to see it double in price shortly afterwards due to a takeover bid.


----------



## Nick Radge

*Re: Technical Analysis vs Fundamental Analysis*

Michael,

"I am sceptical of further strength and and favour a larger decline toward $50.00" _The Chartist, 6 December 2005_

The price was close to $70.00 at the time. A stock naturally ebbs and flows. Back and forth within larger ebbs and flows. Yes you get freak events like WPL this over the last 6-months or ALL earlier  last year, but all in all the majority do ebb and flow. This is why I use EW because its the only way to get a nice handle on that flow and a very specific right/wrong point of being wrong. No other indicator techniques can facilitate decines without prematurely changing the trend.

It may not go that far, but buggered if I'll be long the stock until I'm proven wrong. When I'm wrong, which is more often than not, sure, I'll get in. There are a few stocks that look very poor. LHG comes to mind as an example. Serioues bearish divergence and my experience suggests that divergence is a very good indicator. Same with CBA. I see that CBA "might" go to $36 before it goes to $44. I might be wrong. When I'm proven wrong, well I'll be a buyer again. No harm done.


----------



## TheAnalyst

*Re: Technical Analysis vs Fundamental Analysis*

It seems that CBA is heading into the same waters as MBL I also noticed that RIO even on a day like today still behaved more positively than MBL after the yearly earning release. Another on I have noticed and even on your own The Chartist which i now happily subscribe to is TOL and fundamentally you seem very much correct as well as it may look cheap because of the massive fall but its P/E at the new lows still seems extremley high and i cant see the stock achieving enough growth in earnings to make the P/E match the share price. Although ANZ became a 5% and over shareholder the other day.


----------



## Julia

*Re: Technical Analysis vs Fundamental Analysis*



			
				Nick Radge said:
			
		

> Julia,
> I operate several accounts and styles, so I'll address what I tend to do and offer a sugestion for your dilemma.
> 
> My superfund is strictly buy and hold. I am an accumulator of quality and my time frame is 20-years+. I focus on a stock and with each salary sacrifice I buy some. If it moves too far in my favour, then I focus on another one. And the process goes on. I tend not to add if they go up sharply unless they show siginificant long term potential. An example is IVC which I started buying at $2.25. Once it got past $2.75 I stopped, then decided the upside was much more. If it dips below $3.50 again then I'll step back up. A key component I look at is the total shareholder return over the last 10-years (although IVC hasn't been around that long). I will only exit a position if the company stops paying a dividend or I think they will go under. PBB was one I exited because I thought/think there may be a risk of them going under.
> 
> With trading, I use a different entity and a different game plan. When my stop is hit - I'm out. No second thoughts. No adjustments. No if's or but's. I'm out. I can always re-enter if prices start moving in my direction again. You always have that choice. Letting a loss run does two damaging things:
> 
> (1) It obviously skews the win/loss ratio the wrong way. You must remember that trading is about capital gain, not income growth. You never put your capital at more risk than is acceptable. *Your mind will do everything it can to keep you in a bad trade and get you out of a good trade.* Discipline is the core ingredient and there is no harm in having another go if prices go back again. But after 20-years of trading you will learn that sometimes prices will *never* go back. Look at MGW, PPX, PBG, IIN, WYL, PBB etc etc. These are top quality companies that kept diving and diving. I haven't even suggested HIH, ION, SGW, ONE, etc etc. From a _trading_ perspective, holding these beyond reasonable risk will take you out of the game.
> 
> (2) Allowing a bad trade to go further than your anticipated stop, then seeing it come back will create negative reinforcement. Do it once, and becomes easier the second time and so on. One day, it just won't happen again and you're out of the game. The sub-consious psychological damage will eventually harm you.
> 
> Bottom line: set the stop BEFORE you enter the trade and never, ever amend it backward. You can always re-enter. The market will always offer opportunities. Why do damage to precious capital for the sake of ego?
> 
> Nick



Nick,

Thank you very much.  My situation is as you have described for your super fund above - long term buy and hold.   In this situation, I've just not been able to see any sense in jumping in and out of stocks as they vary according to the general trend of the market on any particular day.

You've reinforced the essential differences between longer term investing and short term trading.  Thank you for making it so clear.

With best wishes

Julia


----------



## TheAnalyst

*Re: Technical Analysis vs Fundamental Analysis*

I wonder if you can use tech analysis to estimate how long we are going to live??


----------



## wayneL

*Re: Technical Analysis vs Fundamental Analysis*



			
				TheAnalyst said:
			
		

> I wonder if you can use tech analysis to estimate how long we are going to live??




Fibonacci extension? 1.618 x mid life crisis?


----------



## Bobby

*Re: Technical Analysis vs Fundamental Analysis*



			
				TheAnalyst said:
			
		

> I wonder if you can use tech analysis to estimate how long we are going to live??




Yep there is !.
I used to have it on my desktop its called ( life counter ) I think, you just answer its questions & it tells you your date of death.

Because of my lifestyle I deleted it long ago. :drink: 

Bob.


----------



## Bobby

*Re: Technical Analysis vs Fundamental Analysis*

Hey Nick,
Gee that comment
 you made--.
Trading is about capital gain ! not income growth.
I'll use that If I may at the  next meeting of our group.

I can suggest a name for you next book.

 Nicks Tricks.
Best Suck for your Buck.
Aussie Stocks.

Suck being sucking up more money (oops) "  

Bob.


----------



## It's Snake Pliskin

*Re: Technical Analysis vs Fundamental Analysis*

Julia,



> If you always heed your stoploss regardless of the fundamental situation, doesn't this incur an excessive amount of brokerage if you are trading frequently?




Yes if one is overtrading. But the opportunity cost (the cost of having a drawdown in favour of another stock that is performing) may be more costly for those who don`t overtrade.

Regards
Snake


----------



## Julia

*Re: Technical Analysis vs Fundamental Analysis*



			
				Snake Pliskin said:
			
		

> Julia,
> 
> 
> 
> Yes if one is overtrading. But the opportunity cost (the cost of having a drawdown in favour of another stock that is performing) may be more costly for those who don`t overtrade.
> 
> Regards
> Snake




Hi Snake,

Yes, of course.   My original question was prompted by a concern that there appeared to sometimes be a blanket hard and fast approach advocated by TA devotees which doesn't necessarily apply to the longer term approach  of some buy and hold investors.  Nick clarified this difference really well.

Cheers

Julia


----------



## bullmarket

*Re: Technical Analysis vs Fundamental Analysis*

Hi Analyst



			
				TheAnalyst said:
			
		

> I wonder if you can use tech analysis to estimate how long we are going to live??




Looks like you can   

Did a quick google after Bobby's post and found this site:

Click here to calculate your Life Expectancy 

It asks you a few questions, and it's best to be honest I guess , and it will will then calculate your theoretical life expectancy.  

Hopefully it won't have already passed   

bullmarket 

ps...sorry about digressing


----------



## ob1kenobi

*Re: Technical Analysis vs Fundamental Analysis*

Thanks for the link. Just checked it, should live to at least 96 years old!





			
				bullmarket said:
			
		

> Hi Analyst
> 
> 
> 
> Looks like you can
> 
> Did a quick google after Bobby's post and found this site:
> 
> Click here to calculate your Life Expectancy
> 
> It asks you a few questions, and it's best to be honest I guess , and it will will then calculate your theoretical life expectancy.
> 
> Hopefully it won't have already passed
> 
> bullmarket
> 
> ps...sorry about digressing


----------



## Milk Man

*Re: Technical Analysis vs Fundamental Analysis*

Mine said I should live til the ripe old age of 54. Only the good die young.


----------



## GreatPig

*Re: Technical Analysis vs Fundamental Analysis*

Mine said 97, but I had to put my parents down as living till 80 as they're still alive and neither are that age yet (but the other choices were all early deaths).

Apparently my main negative factor is my gender. Looks like I'll have to change it if I want to live longer 

Cheers,
GP


----------



## wayneL

*Re: Technical Analysis vs Fundamental Analysis*



			
				Milk Man said:
			
		

> Only the good die young.




87

At least I'm not as bad as that evil ob1kenobi!


----------



## bullmarket

*Re: Technical Analysis vs Fundamental Analysis*

Sorry Julia 

looks like we've derailed your train of thought earlier in the thread    

hopefully some of the carriages can be put back on track with normal services resuming shortly.

sorry...

ps.......for the record mine was spot on 80   

bullmarket


----------



## clowboy

*Re: Technical Analysis vs Fundamental Analysis*

ha ha

yea I had a gender issue to WayneL so I might cya round at the plastic surgeons.

There was no "do you ride a motorbike" question though so I think the test is flawed.  If there was I think I would already be techniqually dead.


Anyway I only got until 81 so I guess I better get out there and live a little more (might go for a bike ride without a helmet).


----------



## Julia

*Re: Technical Analysis vs Fundamental Analysis*

I've just done the test.  Doesn't look good - it declares I shall be around until I'm 102!!  

This is mostly due to my genes - grandmother died at 105, grandfather at 99, father committed suicide at 94 but would have lived many more years.

I'd better rethink my financial plans!

Julia


----------



## Mrs Mallins

*Re: Technical Analysis vs Fundamental Analysis*



			
				Rafa said:
			
		

> your a smart bugger Joe Blow!!!




Please Dears,  If you do remember your simple arithmatic to do your accounting and fundamental analysis, you might remember your basic english grammar and know the difference between your, and you're.

*your* is the word you use when  relating to you or yourself or yourselves especially as possessor or possessors <your bodies>,  

*you're* is a way of joining a pronoun (you) and a verb (are) with the apostrophe as a tool to indicate a missing space and letter. "You're" almost makes a little sentance on its own but uses an abstract noun as an object - like daft as in "You're daft!".  Or, "You're a smart bugger Joe Blow." - And indeed he seems to be a smart chap.

Each word, your and you're, has a unique sound if pronounced correctly.  Methinks that Tech/a and others here, being math types do not know how to use the aspostrophe correctly so don't use it at all.  Or is it because you are using Dragon Naturally Speaking which listens with an American twang and types incorrectly?


----------



## wayneL

*Re: Technical Analysis vs Fundamental Analysis*



			
				Mrs Mallins said:
			
		

> Please Dears,  If you do remember your simple arithmatic to do your accounting and fundamental analysis, you might remember your basic english grammar and know the difference between your, and you're.
> 
> *your* is the word you use when  relating to you or yourself or yourselves especially as possessor or possessors <your bodies>,
> 
> *you're* is a way of joining a pronoun (you) and a verb (are) with the apostrophe as a tool to indicate a missing space and letter. "You're" almost makes a little sentance on its own but uses an abstract noun as an object - like daft as in "You're daft!".  Or, "You're a smart bugger Joe Blow." - And indeed he seems to be a smart chap.
> 
> Each word, your and you're, has a unique sound if pronounced correctly.  Methinks that Tech/a and others here, being math types do not know how to use the aspostrophe correctly so don't use it at all.  Or is it because you are using Dragon Naturally Speaking which listens with an American twang and types incorrectly?




Thanks Mrs. Mallins, we need a defender of the language around here! I'm a stickler for correct grammer, pronunciation and spelling as well...even if my own transgressions are all too common.

I hope you don't mind me pointing out that "arithmatic" is spelt arithmetic.

I know I am now setting myself up for numerous corrections, but I don't mind. English is a fine language and we should adhere to the highest standard as far as possible. 

However, one of the best attributes of we english speakers is the forgiveness of language sin. As we listen, we fill in the blanks for others who aren't so proficient. We shouldn't lose that trait either.

But jeez, we're getting way off topic here!!

Cheers


----------



## bullmarket

*Re: Technical Analysis vs Fundamental Analysis*

Hi missus M 



			
				Mrs Mallins said:
			
		

> Please Dears,  If you do remember your simple arithmatic to do your accounting and fundamental analysis, you might remember your basic english grammar and know the difference between your, and you're.
> 
> *your* is the word you use when  relating to you or yourself or yourselves especially as possessor or possessors <your bodies>,
> 
> *you're* is a way of joining a pronoun (you) and a verb (are) with the apostrophe as a tool to indicate a missing space and letter. "You're" almost makes a little sentance on its own but uses an abstract noun as an object - like daft as in "You're daft!".  Or, "You're a smart bugger Joe Blow." - And indeed he seems to be a smart chap.
> 
> Each word, your and you're, has a unique sound if pronounced correctly.  Methinks that Tech/a and others here, being math types do not know how to use the aspostrophe correctly so don't use it at all.  Or is it because you are using Dragon Naturally Speaking which listens with an American twang and types incorrectly?




i toatally agree wiff ya......when i wos a kid i coodn even speel injunear......and now i are wun....

iff everywun cood talk proppa innear like i doo weed b a lot eeziar ta unnerstan.

cheers 

boolmarkat...


----------



## RichKid

*Re: Technical Analysis vs Fundamental Analysis*

Boy, was that a funny thread or what!?


----------



## Garpal Gumnut

*Re: Technical Analysis vs Fundamental Analysis*

I think it is now time to address again whether TA is better than FA in stock analysis.

I'm watching Comrade O'Brien on the 7.30 Report interviewing some Hong Kong based Yankee fundamentalist who is doing more analytic contortions than Houdini.

Is anyone still using Funnymentals or have you all finally come to the Nirvana of chart analysis?

gg


----------



## skc

*Re: Technical Analysis vs Fundamental Analysis*



Garpal Gumnut said:


> I think it is now time to address again whether TA is better than FA in stock analysis.
> 
> I'm watching Comrade O'Brien on the 7.30 Report interviewing some Hong Kong based Yankee fundamentalist who is doing more analytic contortions than Houdini.
> 
> Is anyone still using Funnymentals or have you all finally come to the Nirvana of chart analysis?
> 
> gg




I use charts but still get funny sometimes. Speculating take over / capital raising etc are some examples.

I think funnymentals can be applied the same way as technical analysis.

My fundamental analysis showed that XYZ is a good business and profit may go up. So I went long. They release a bad revenue report and therefore invalidate my analysis. I exit my trade. 

My technical analysis showed that XYZ shows a ascending triangle so I went long on break out. It was a false break, they released a bad revenue report and my stop got hit.

Same same...


----------



## johnnyg

*Re: Technical Analysis vs Fundamental Analysis*

Did Fundamental Analysis give any warning that this was coming? 

Would Technical Analysis picked up that something wasn't quite right?


----------



## tech/a

*Re: Technical Analysis vs Fundamental Analysis*

*Yes*

CLICK TO EXPAND


----------



## prawn_86

*Re: Technical Analysis vs Fundamental Analysis*



tech/a said:


> *Yes*




I dont see how that description indicates any hint of a 15% drop  To me it says 'it may go up, or down'


----------



## wayneL

*Re: Technical Analysis vs Fundamental Analysis*

T/A is not an efficient predictor, toss of the coin stuff generally. 

T/A is about creating trading boundaries (to borrow Nick's phrase) and creating favourable risk/reward scenarios.

Simples.


----------



## tech/a

*Re: Technical Analysis vs Fundamental Analysis*

Oh you wanted the degree of movement as well.



> Would Technical Analysis picked up that something wasn't quite right?




I thought that I was answering this question.


----------



## prawn_86

*Re: Technical Analysis vs Fundamental Analysis*

And how did it indicate something wasnt quite right? It seemed a very neutral comment to me unless im reading it wrong.

More of a 'watch this space' thing than 'look out somethings about to go wrong'. Thats just my view though, i could be interpreting it wrong


----------



## ThingyMajiggy

*Re: Technical Analysis vs Fundamental Analysis*



prawn_86 said:


> And how did it indicate something wasnt quite right? It seemed a very neutral comment to me unless im reading it wrong.
> 
> More of a 'watch this space' thing than 'look out somethings about to go wrong'. Thats just my view though, i could be interpreting it wrong




Would have thought with no demand being around that obviously there is more supply, therefore a down move, especially with the negativity in the background.

If its not interested in going up....thats usually a good sign that "somethings about to go wrong".

My personal thoughts though of course.


----------



## tech/a

*Re: Technical Analysis vs Fundamental Analysis*

Chart needs to be read in context
Ive labelled it up--hope it helps.


----------



## Julia

*Re: Technical Analysis vs Fundamental Analysis*



johnnyg said:


> Did Fundamental Analysis give any warning that this was coming?
> 
> Would Technical Analysis picked up that something wasn't quite right?



I'm no charting expert but I wouldn't have thought that chart predicted anything, and certainly not that sort of gap down.

But it ties in pretty well with the announcement that the ACCC is after Cabcharge.
Seems like a straightforward response to negative news to me.


----------



## tech/a

*Re: Technical Analysis vs Fundamental Analysis*

That it was.---The day after the alert.

The question was *Would Technical Analysis picked up that something wasn't quite right?*

The answer is yes there was no demand with background weakness.
So before the drop-- infact a day before there was a warning that although price did rise slightly there was no demand.

The analysis told you it was weak not that it was going to crash next day.
So the "something not quite right" was No demand on that up bar.
You wouldnt have been placing a long buy based on that technical evidence.

You all seem upset that there was software that actually picked up that something was indeed wrong??


----------



## ceasar73

*Re: Technical Analysis vs Fundamental Analysis*

Ive a few wealthy older friends who claim to be long term investors. They insist its all about the fundamentals...EPS mainly.Guess how they make their money in the market? They rely on good broker tips or insider info, they jump in at the *right time* and ride the *trend*...they go with the flow for a few weeks and make a killing.

Every time they research a company to death and stay on it long term...they seem to make FA!......but its still all about the fundamentals they insist, yeah rite!


----------



## wayneL

*Re: Technical Analysis vs Fundamental Analysis*



tech/a said:


> That it was.---The day after the alert.
> 
> The question was *Would Technical Analysis picked up that something wasn't quite right?*
> 
> The answer is yes there was no demand with background weakness.
> So before the drop-- infact a day before there was a warning that although price did rise slightly there was no demand.
> 
> The analysis told you it was weak not that it was going to crash next day.
> So the "something not quite right" was No demand on that up bar.
> You wouldnt have been placing a long buy based on that technical evidence.
> 
> *You all seem upset that there was software that actually picked up that something was indeed wrong??*




Ahhhhh the master of non-sequitur strikes again.

The something not quite right may have resulted in further sideways action. 

Look! VSA adds another dimension to analysis, maybe it gives an edge... I'm sure it does, but picking an extraordinary example like that is what option course marketers do. In isolation, it's total BS.

That's not a criticism of the software at all, I'm certain it's quite good, but that signal must be taken in context with another 999 or so identical signals.


----------



## prawn_86

*Re: Technical Analysis vs Fundamental Analysis*



tech/a said:


> You all seem upset that there was software that actually picked up that something was indeed wrong??




It didnt pick up something was wrong, its mearly indicated a neutral situation. You said you wouldnt place a long with that bar, fair enough. But would you have placed a short?


----------



## Timmy

*Re: Technical Analysis vs Fundamental Analysis*

Start with the disclaimer - I am a fan of VSA/Wyckoff, makes a lot of sense to me.

The alert given in the software is an alert, a heads up.  Read in context it says there is further weakness expected.
Does it indicate a 15% drop coming,  No.  It could have just been more sideways coming up, that's a trade management issue after entry.
Can it get you on the right side of the market, yes.  How you manage the trade after that is the next question.
Did it create a favourable risk/reward scenario.  Well, that's in the eye of the beholder but I've already said I am a fan so you know what I think.

The alert came a day before the ACCC announcement.  That's the sort of thing technical analysis purports to pick up, especially VSA/Wyckoff.


----------



## johnnyg

*Re: Technical Analysis vs Fundamental Analysis*



Julia said:


> I'm no charting expert but I wouldn't have thought that chart predicted anything, and certainly not that sort of gap down.
> 
> But it ties in pretty well with the announcement that the ACCC is after Cabcharge.
> Seems like a straightforward response to negative news to me.




CAB for myself came up on one of my scan's on the 18/6/09. In my notes I put down that there was an indication of selling.

Now for myself, and using T/A if I had a long position in CAB I would of tightened up my stop. Did I know that CAB was going to fall 15% in the coming days? No, but for myself, I was of the opinion that something wasn't quite right, and in order to minimize my risk, or protect my profits, I would of tightened my stop.

What were the Fundamentals saying?

I'm pretty much just repeating what Tech has already posted, maybe and most probably my line of thinking is different to other people (which i hope is a good thing)

wayneL - I'm curious as to when you would use some type of signal in Isolation?


----------



## Timmy

*Re: Technical Analysis vs Fundamental Analysis*

Even going back a little further there were very clear alerts on about the 8th, Tech can you provide the dialog box for those earlier alerts to weakness?


----------



## nunthewiser

*Re: Technical Analysis vs Fundamental Analysis*

ok . all well and good saying it indicated this or it indicated that 

what i,d like to know is why it wasnt actually pointed out until afterwards or is this more hindsight i told u so bull that ppl like to preach so freely here ?

and before anyone starts stomping off or getting upset please note theres no offense intended , just intrested in all these great hindsight calls and indicators and wondering why they so easy to spot afterwards but not mentioned at time


----------



## johnnyg

*Re: Technical Analysis vs Fundamental Analysis*



Timmy said:


> Even going back a little further there were very clear alerts on about the 8th, Tech can you provide the dialog box for those earlier alerts to weakness?




Looks like Upthrust Bars.


----------



## skc

*Re: Technical Analysis vs Fundamental Analysis*



tech/a said:


> That it was.---The day after the alert.
> 
> The question was *Would Technical Analysis picked up that something wasn't quite right?*
> 
> The answer is yes there was no demand with background weakness.
> So before the drop-- infact a day before there was a warning that although price did rise slightly there was no demand.
> 
> The analysis told you it was weak not that it was going to crash next day.
> So the "something not quite right" was No demand on that up bar.
> You wouldnt have been placing a long buy based on that technical evidence.
> 
> You all seem upset that there was software that actually picked up that something was indeed wrong??




Using the same argument, fundamental analysis could also have revealed the same.

Cabcharge has increased their market share from 50% to 85% in the last 2 years. In a public interview, CEO mentioned that they install their own meters below cost so competitors can't get theirs in.

A very good fundamentalist would have thought ACCC is on their tails - a conclusion that can easily be arrived at in hindsight. The fundamentalist will exit the trade as soon as ACCC news is out.


----------



## Timmy

*Re: Technical Analysis vs Fundamental Analysis*



nunthewiser said:


> ok . all well and good saying it indicated this or it indicated that
> 
> what i,d like to know is why it wasnt actually pointed out until afterwards or is this more hindsight i told u so bull that ppl like to preach so freely here ?
> 
> and before anyone starts stomping off or getting upset please note theres no offense intended , just intrested in all these great hindsight calls and indicators and wondering why they so easy to spot afterwards but not mentioned at time




Just for clarity/definition sake, if the alert came up at the close on the 25th then that would not be hindsight?


----------



## Timmy

*Re: Technical Analysis vs Fundamental Analysis*



skc said:


> Using the same argument, fundamental analysis could also have revealed the same.
> 
> Cabcharge has increased their market share from 50% to 85% in the last 2 years. In a public interview, CEO mentioned that they install their own meters below cost so competitors can't get theirs in.
> 
> A very good fundamentalist would have thought ACCC is on their tails - a conclusion that can easily be arrived at in hindsight. The fundamentalist will exit the trade as soon as ACCC news is out.




I suppose an example of a fundamentalist pointing this out would be conclusive. Tech has posted the example of T/A actually pointing it out.


----------



## nunthewiser

*Re: Technical Analysis vs Fundamental Analysis*



Timmy said:


> Just for clarity/definition sake, if the alert came up at the close on the 25th then that would not be hindsight?




but would have anyone taken any notice of the alert on that date , that action on that day no different in vols or ranges to many other points on that cab chart in the past where it has risen or continued sideways .. all im saying is how easy it is for one to point out something is wrong AFTER it has actually happened , i didnt see any one mentioning alerts previous to the falls

just wondering why


----------



## moXJO

*Re: Technical Analysis vs Fundamental Analysis*

Trade management is probably the more important. But for my hindsight call








It broke the trend and it failed to get back on. Also possible down tri. Some other indicators were looking sus. Also sup/res line at roughly 6.70 broken then tested and failed. I know its hindsight but I don't think that was a long trade in the making. If you could pick that drop or not probably depends on if you believe that was a down tri and trusted yourself to get on when it broke down. I'm sure everyone else saw something different with more complicated tools then I.


----------



## ThingyMajiggy

*Re: Technical Analysis vs Fundamental Analysis*



Timmy said:


> Just for clarity/definition sake, if the alert came up at the close on the 25th then that would not be hindsight?






nunthewiser said:


> but would have anyone taken any notice of the alert on that date , that action on that day no different in vols or ranges to many other points on that cab chart in the past where it has risen or continued sideways .. all im saying is how easy it is for one to point out something is wrong AFTER it has actually happened , i didnt see any one mentioning alerts previous to the falls
> 
> just wondering why




Here is the dialog box for the earlier weakness Timmy. The alert after it is a "Trap Upmove" 

Nun- the signals do happen live, they are NOT buy/sell signals, at most they are confirmation, anyone that knows VSA/Wyckoff will know what the signal will be before it appears, could have easily seen that on the 25th was going to be no demand before it closed, I personally don't make any decisions based JUST off the signals, they are just ALERTS, thats all they do, alert you that something might be up....or down in this case   you can tell what the alert is going to say before it appears if you know what to look for 

I too, would be interested to see a funnys point of view.


----------



## skc

*Re: Technical Analysis vs Fundamental Analysis*



Timmy said:


> I suppose an example of a fundamentalist pointing this out would be conclusive. Tech has posted the example of T/A actually pointing it out.




If a fundamentalist doesn't know this it is not because the information doesn't exist, but that he/she didn't look hard enough.

The fundamentalist has no chance of predicting when ACCC will serve them notice. But they will either avoid CAB due to this concern, or they will sell soon as they know about the news. 

And guess who did the selling when the news first came out? It was the fundamentalist who saw the news on the ACCC website!

I am not discounting technical analysis and whether it could have been useful in this instance. Chances are some technical analyst would react to the signal the day before, and some wouldn't. 

All I am saying is a "good fundamentalist" could have arrived at the same conclusion by hitting sell as soon as they saw the news. 

A side note. In normal situation, CAB would go into a halt with an announcement that ACCC is on their back. Prices would gap down and right through any stops. In this particular instance, CAB didn't open the ACCC letter for another 3 hours, so normal trading took place even when ACCC released the news on their end. Allowing the nimble fundamentalist or technical analyst to get out.


----------



## Timmy

*Re: Technical Analysis vs Fundamental Analysis*

Thanks for posting that info Sam.


----------



## Timmy

*Re: Technical Analysis vs Fundamental Analysis*



skc said:


> In a public interview, CEO mentioned that they install their own meters below cost so competitors can't get theirs in.




skc - can you recall or find out the date of that interview?  Be useful to look at price activity immediately following the CEO placing his foot into his mouth.


----------



## tech/a

*Re: Technical Analysis vs Fundamental Analysis*



wayneL said:


> Ahhhhh the master of non-sequitur strikes again.
> 
> The something not quite right may have resulted in further sideways action.
> 
> Look! VSA adds another dimension to analysis, maybe it gives an edge... I'm sure it does, but picking an extraordinary example like that is what option course marketers do. In isolation, it's total BS.
> 
> That's not a criticism of the software at all, I'm certain it's quite good, but that signal must be taken in context with another 999 or so identical signals.






prawn_86 said:


> It didnt pick up something was wrong, its mearly indicated a neutral situation. You said you wouldnt place a long with that bar, fair enough. But would you have placed a short?





If you were trading CAB using an EOD chart and you were looking for short trades then chances are that youd have been short from confirmation of the Upthrust alert.
You could have added to the position with the trade parameters I had suggested on the chart.
Complicate it as much as you like--its pretty basic analysis.
Could have gone sideways,could have gone up,but it went down as the analysis indicated. Both the first and the second alerts.

If you werent watching CAB with a view of going short or already short--then youd have missed it like 99.99% of the world.
Just answered the question thats all.


----------



## skc

*Re: Technical Analysis vs Fundamental Analysis*



Timmy said:


> skc - can you recall or find out the date of that interview?  Be useful to look at price activity immediately following the CEO placing his foot into his mouth.




I have no idea when the interview was. But it's back in 2007 as indicated by this news report.

http://business.theage.com.au/business/cabcharge-accused-over-market-power-20090626-d00o.html


----------



## beamstas

*Re: Technical Analysis vs Fundamental Analysis*

I love Scott Barlows interview in radges book. He destroys TA vs FA.


----------



## Mad Mel

*Re: Technical Analysis vs Fundamental Analysis*



wayneL said:


> Thanks Mrs. Mallins, we need a defender of the language around here! I'm a stickler for correct grammer, pronunciation and spelling as well...even if my own transgressions are all too common.
> 
> I hope you don't mind me pointing out that "arithmatic" is spelt arithmetic.




And "grammer" is spelled "grammar".  And "spelt" is spelled "spelled".

Oh the ironing.


----------



## ThingyMajiggy

*Re: Technical Analysis vs Fundamental Analysis*



Mad Mel said:


> And "grammer" is spelled "grammar".  And "spelt" is spelled "spelled".
> 
> Oh the ironing.




......and you're not supposed to start a sentence with And.


----------



## Mad Mel

*Re: Technical Analysis vs Fundamental Analysis*

heh, touche.

And....  trying.... desperately to fill up one hundred characters....


----------



## Mr J

*Re: Technical Analysis vs Fundamental Analysis*



Mad Mel said:


> And "grammer" is spelled "grammar".  And "spelt" is spelled "spelled".
> 
> Oh the ironing.




He had already protected himself by admitting he was a regular violator.



> And.... trying.... desperately to fill up one hundred characters....




This would explain your use of 'ironing' instead of 'irony' :.


----------



## Julia

*Re: Technical Analysis vs Fundamental Analysis*



Timmy said:


> skc - can you recall or find out the date of that interview?  Be useful to look at price activity immediately following the CEO placing his foot into his mouth.



Interesting account here of how it all went down.
http://www.businessspectator.com.au/bs.nsf/Article/Cabcharge-pd20090701-TJB4K?OpenDocument&src=kgb



ThingyMajiggy said:


> ......and you're not supposed to start a sentence with And.



Sam, strictly speaking that's true.  But it's something that has become pretty much acceptable on the basis of it reflecting how we speak, i.e. denoting a pause between one statement and another which is related.


----------



## ThingyMajiggy

*Re: Technical Analysis vs Fundamental Analysis*



Julia said:


> Interesting account here of how it all went down.
> http://www.businessspectator.com.au/bs.nsf/Article/Cabcharge-pd20090701-TJB4K?OpenDocument&src=kgb
> 
> 
> Sam, strictly speaking that's true.  But it's something that has become pretty much acceptable on the basis of it reflecting how we speak, i.e. denoting a pause between one statement and another which is related.




Haha, yeah I know  I was just keeping the ball rolling as far as picking on each others spelling and grammar. : I do it myself most of the time!


----------



## skc

*Re: Technical Analysis vs Fundamental Analysis*



Mr J said:


> He had already protected himself by admitting he was a regular violator.
> 
> 
> 
> This would explain your use of 'ironing' instead of 'irony' :.




Open up your mind, Mr J. He was simply posting this in front of a pile of ironing to be done tonight.


----------



## skc

*Re: Technical Analysis vs Fundamental Analysis*



Julia said:


> Interesting account here of how it all went down.
> http://www.businessspectator.com.au/bs.nsf/Article/Cabcharge-pd20090701-TJB4K?OpenDocument&src=kgb




Thanks Julia. Very interesting article. A couple of sentences of note:



> Meanwhile, an hour after the process server served the Cabcharge statement of claim, the ACCC put a press release on their website. Soon after a*n observant trader saw the announcement*, realised the significance and began selling Cabcharge shares heavily.




Definitely not a technical trader who saw the news!



> Maybe a phone call alerting the company would have been a good idea and in practice that probably happens. But in the case of Cabcharge, there is* no secret that there is a history of bad blood between the two organisations*.




And there is a history there for anyone following the company closely.



> On the Friday morning, Cabcharge was trading as high as $6.47 and plunged as low as $5.36. *There is a clear case for those transactions to be reversed.* Release of the information saw the stock fall even further.




I sincerely hope not! This will punish any people with proper stop loss in place.


----------



## wayneL

*Re: Technical Analysis vs Fundamental Analysis*



Mad Mel said:


> And "spelt" is spelled "spelled".



Both are correct. http://dictionary.reference.com/browse/spelt


----------



## Timmy

*Re: Technical Analysis vs Fundamental Analysis*



Julia said:


> Interesting account here of how it all went down.
> http://www.businessspectator.com.au/bs.nsf/Article/Cabcharge-pd20090701-TJB4K?OpenDocument&src=kgb





Thanks for the link Julia, interesting.

What I was more interested in was finding out when the public interview skc referred to was actually made public, as
skc said a good fundamentalist would have picked up on the fact that the ACCC would be on CAB's tail.

I wanted to compare the price action from around the time of the interview to the price action on the 25th June when tech pointed out the VSA alert or on the 8th which was the previous most recent weakness alerts.

But apparently the interview was in 2007, which makes it all a bit pointless.  I didn't really want to get into 
a FA vs TA debate (again), but since it was brought up I thought why not examine the evidence?  Could have
been a good learning exercise.  But if the interview was 18 months to 2 years ago then the alerts from June 25 or 
8th are not the relevant alerts at all which all makes it a bit inane.


----------



## tech/a

*Re: Technical Analysis vs Fundamental Analysis*

Which alerts would you like?

All alerts SHOULD be read with the prevailing trend.
Chart from 2006
Click to expand.


----------



## nunthewiser

*Re: Technical Analysis vs Fundamental Analysis*



tech/a said:


> Which alerts would you like?
> 
> All alerts SHOULD be read with the prevailing trend.
> Chart from 2006
> Click to expand.





i can draw them in after also , like join the dots


how about some live alerts/e.o.d?


----------



## tech/a

*Re: Technical Analysis vs Fundamental Analysis*

Happy to accommodate any charts your interested in or would you like me to find some using the search function.



> i can draw them in after also , like join the dots




The software places the alerts when they happen just as they did on the first charts.


----------



## nunthewiser

*Re: Technical Analysis vs Fundamental Analysis*



tech/a said:


> Happy to accommodate any charts your interested in or would you like me to find some using the search function.




anyhow you wish as long as there a current item

sincerely thankyou in advance


----------



## tech/a

*Re: Technical Analysis vs Fundamental Analysis*



nunthewiser said:


> anyhow you wish as long as there a current item
> 
> sincerely thankyou in advance





This is an old scan (3 days ago.) results page I'll do a new one now will take 20 min so will have a shower and be back.


----------



## tech/a

*Re: Technical Analysis vs Fundamental Analysis*

Just grabbed a few without fully analysing.
These are* short alerts *either a 2 bar set up over yesteday and the day before or yesterday only.

MAP
MTS
MND
ORI
SWK
VMS

These are alerts so if I was to trade them I would have a trigger.
Taking MAP as an example I would sell at open and stop $2.32

Will follow this on a shorter term charts as an example.
Will post up from work.


----------



## skc

*Re: Technical Analysis vs Fundamental Analysis*



Timmy said:


> Thanks for the link Julia, interesting.
> 
> What I was more interested in was finding out when the public interview skc referred to was actually made public, as
> skc said a good fundamentalist would have picked up on the fact that the ACCC would be on CAB's tail.
> 
> I wanted to compare the price action from around the time of the interview to the price action on the 25th June when tech pointed out the VSA alert or on the 8th which was the previous most recent weakness alerts.
> 
> But apparently the interview was in 2007, which makes it all a bit pointless.  I didn't really want to get into
> a FA vs TA debate (again), but since it was brought up I thought why not examine the evidence?  Could have
> been a good learning exercise.  But if the interview was 18 months to 2 years ago then the alerts from June 25 or
> 8th are not the relevant alerts at all which all makes it a bit inane.




The fundamentalist (and has to be a very good one) seeing that interview and any subsequent data (like how CAB increased their market share like a monopoly) will not automatically sell out. They will probably use that as an alert and be warned about potential turnaround if and when ACCC was to pounce.

The action taken by the fundamentalist is essentially the same as a T/A. Determine/investigate and recognise a signal, anticipate possible outcome, protect downside, and if staying in the stock, wait for confirmation (and keep an eye out on any ACCC press release).

The good fundamentalist knows when he/she is wrong, just like a T/A.

Granted that this seems hard work compared to a program that throws out signals based on charts. But hard work <> useless.


----------



## tech/a

*Re: Technical Analysis vs Fundamental Analysis*

Follow up on MAP


----------



## nunthewiser

*Re: Technical Analysis vs Fundamental Analysis*

thanks for your time on them tech/a

will have a proper look over the weekend 

cheers


----------



## tech/a

*Re: Technical Analysis vs Fundamental Analysis*



tech/a said:


> Just grabbed a few without fully analysing.
> These are* short alerts *either a 2 bar set up over yesteday and the day before or yesterday only.
> 
> MAP
> MTS
> MND
> ORI
> SWK
> VMS
> 
> These are alerts so if I was to trade them I would have a trigger.
> Taking MAP as an example I would sell at open and stop $2.32
> 
> Will follow this on a shorter term charts as an example.
> Will post up from work.




Just had a look at all of these again.

EVERYONE of them are lower than they were when I posted the alert.
Nun Hope this is helpful.


----------



## nunthewiser

*Re: Technical Analysis vs Fundamental Analysis*



tech/a said:


> Just had a look at all of these again.
> 
> EVERYONE of them are lower than they were when I posted the alert.
> Nun Hope this is helpful.





holds MTS ..... no concerns TO ME actually until it breaks its long term channel ...... tis a warchest for me , held and added for years , enjoy the franked divvies 


MAP actually a tad higher than when posted but not here to argue calls was mainly intrested in the live scans 

again i thank you for your time on the matter and apologise for not returning the courtesy by replying sooner or with a deeper analysis on those posted


----------



## tech/a

*Re: Technical Analysis vs Fundamental Analysis*

MTS ?

Am I looking at the same chart as you?
I see bugger all.

Very flat and boring.
But if you can make a $ out of that then you can make a $ out of most anything!

Hang on back 2001 ish!!

Ahh now I see.


----------



## nunthewiser

*Re: Technical Analysis vs Fundamental Analysis*



tech/a said:


> MTS ?
> 
> Am I looking at the same chart as you?
> I see bugger all.
> 
> Very flat and boring.
> But if you can make a $ out of that then you can make a $ out of most anything!





hell yeah .very flat .very boring , very tradeable channel 380 -430 ish 

repeats tho this is a warchest stock for me , sits there nice and mellow , collecting divvies ...... CURRENTLY overall on average entrys sitting on 45% gain....... may not be a great return from holding over 5 years from first parcel purchased  but when you add lil things like fully franked divvies year in year out it kinda adds up 

definately NOT everyones cup of tea 

i do trade plenty others for volatility / larger moves as posted here so not really just an ole nanna ALL the time 


lol i even trade stuff like nasty old LKO for kicks at times 

just saying MTS is an investment stock FOR ME , happy to be slow and steady with it


----------



## Julia

*Re: Technical Analysis vs Fundamental Analysis*



tech/a said:


> Just had a look at all of these again.
> 
> EVERYONE of them are lower than they were when I posted the alert.
> Nun Hope this is helpful.



Pretty much the whole market has fallen during this period.
Therefore it's a bit hard to see that there's anything special about shorting these.


----------



## nunthewiser

*Re: Technical Analysis vs Fundamental Analysis*



Julia said:


> Pretty much the whole market has fallen during this period.
> Therefore it's a bit hard to see that there's anything special about shorting these.





MAP has actually risen and more than likely any short trade entered on that date would have been stopped out by now ....but thats a side issue 

i havent looked at the others except MTS ( my laziness)

was intrested in the scans originally 

but yes do agree re market falling and hardly rocket science

but do appreciate the time spent on it


----------



## ThingyMajiggy

*Re: Technical Analysis vs Fundamental Analysis*

Well done everyone for making money then


----------



## tech/a

*Re: Technical Analysis vs Fundamental Analysis*



Julia said:


> Pretty much the whole market has fallen during this period.
> Therefore it's a bit hard to see that there's anything special about shorting these.




Julia.

Nun asked for realtime examples these were what I pulled up within a few hrs.
Nothing special about those chosen-- just making the point of being on the right side of the market.
Short right now is the right side of the market.


----------



## robusta

Sorry to bring back this ancient thread but I have recieved a few comments on my post's like: Why bother crunching numbers?, It's all priced in the sp just follow the trend.....

Now first let me state I am not arguing against technical analysis but explaining why I prefer Fundamental Analysis for my money.

"Graham's favorite allegory is that of Mr. Market, a fellow who turns up every day at the stock holder's door offering to buy or sell his shares at a different price. Often, the price quoted by Mr. Market seems plausible, but often it is ridiculous. The investor is free to either agree with his quoted price and trade with him, or to ignore him completely. Mr. Market doesn't mind this, and will be back the following day to quote another price. The point is that the investor should not regard the whims of Mr. Market as determining the value of the shares that the investor owns. He should profit from market folly rather than participate in it. The investor is best off concentrating on the real life performance of his companies and receiving dividends, rather than being too concerned with Mr. Market's often irrational behavior."

Ok if you doubt the Mr Market allegory explain to me how CBA sp has fluctuated between $60.00 and $47.05 YTD.

The underlying business has not changed that much. Does Europe debt crisis and American recession really impact CBA's long term profitability?


"Graham wrote that the owner of equity stocks should regard them first and foremost as conferring part ownership of a business. With that perspective in mind, the stock owner should not be too concerned with erratic fluctuations in stock prices, since in the short term, the stock market behaves like a voting machine, but in the long term it acts like a weighing machine (i.e. its true value will in the long run be reflected in its stock price). "

This is where it gets exciting, we know if we own part of a great business and that business by definition is delivering increasing profits the share price will eventually follow.

Now to really turbo charge your returns concentrate only on the top 1-2% quality companies and only buy them when they are under valued.


----------



## Julia

robusta said:


> Ok if you doubt the Mr Market allegory explain to me how CBA sp has fluctuated between $60.00 and $47.05 YTD.
> 
> The underlying business has not changed that much. Does Europe debt crisis and American recession really impact CBA's long term profitability?



Robusta, what you're failing to 'get' is that those of us who follow price action don't give a stuff *why*  CBA has fluctuated as you describe above.

If you're so determined to dismiss trend following or TA in general, then you will never be prepared to consider any approach other than the basic FA you are presently employing.

I honestly don't care what Graham or Buffet ever said.  That style of investing is simply not the only - or even necessarily the best - way.


----------



## sinner

robusta said:


> Ok if you doubt the Mr Market allegory explain to me how CBA sp has fluctuated between $60.00 and $47.05 YTD.




Easy.

Bull markets generate alpha. i.e. Correlations across asset classes are *low*. A rising tide doesn't lift all boats, but it allows good boats to navigate their way out of the harbour.

Bear markets are low alpha, high beta. Correlations across asset classes are *very high* and the movements are very volatile. 

We are currently in a large bear market, ergo CBA price *is* affected by the rumblings of EURUSD and the overnight close in SP500.


----------



## robusta

Julia said:


> Robusta, what you're failing to 'get' is that those of us who follow price action don't give a stuff *why*  CBA has fluctuated as you describe above.
> 
> If you're so determined to dismiss trend following or TA in general, then you will never be prepared to consider any approach other than the basic FA you are presently employing.
> 
> I honestly don't care what Graham or Buffet ever said.  That style of investing is simply not the only - or even necessarily the best - way.




Julia what you are failing to 'get' is I am not dismissing trend folllowing or TA in general I have stated I believe it is a valid investment option.

The CBA example is to explain how value investing can take advantage of marker irrationality and fluctuations.

Maybe this is not the best medium to comminicate on I have only ever stated for MY money I am the most comfortable following Graham, Buffet et al. 

If we never had a difference of opinion how would we ever learn anything?

I stick by my arguement that my 'that' style of investing is the best and further more would love to be proved wrong - would you?


----------



## So_Cynical

robusta something that you must accept is that there's alot of trend followers on this forum (i call em trendy's ) in general these people buy trends and do that via whatever instrument is appropriate...while some types of trend following could be considered investing, on the whole its probably not realistic to call trendy's investors.

While im mostly in agreement with your comments re Mr market etc, i can also see the logic behind trend following and understand that both methods can be profitable....prob best to keep in mind that there's buyers and seller at all price levels, for all sorts of reasons.

1 good thing about trend following is that its a discipline that anyone can learn, while not all personality's are ideally suited to following that discipline.


----------



## Boggo

robusta said:


> "Graham wrote that the owner of equity stocks should regard them first and foremost as conferring part ownership of a business. With that perspective in mind, the stock owner should not be too concerned with erratic fluctuations in stock prices, since in the short term, the stock market behaves like a voting machine, but in the long term it acts like a weighing machine (i.e. its true value will in the long run be reflected in its stock price). "




And that my friend is the mentality that has kept TLS holders hanging on to a dog when they should have had their money working for them.

On the subject of TLS, MacQuarie Private Wealth has maintained a "hold" on it for some time now, they just keep reducing the value price, last reduction was on Oct 11th, "Our price target has been reduced from $3.15 a share to $2.95."

Your quote is correct 


robusta said:


> (i.e. its true value will in the long run be reflected in its stock price). "




Different strokes for different folks though I guess.


----------



## robusta

Boggo said:


> And that my friend is the mentality that has kept TLS holders hanging on to a dog when they should have had their money working for them.
> 
> On the subject of TLS, MacQuarie Private Wealth has maintained a "hold" on it for some time now, they just keep reducing the value price, last reduction was on Oct 11th, "Our price target has been reduced from $3.15 a share to $2.95."
> 
> 
> 
> Different strokes for different folks though I guess.




Could not agree more Boggo

On the subject of TLS any company that borrows to pay dividends would not ever come up on my radar as investment grade.


----------



## motorway

robusta said:


> Sorry to bring back this ancient thread but I have recieved a few comments on my post's like: Why bother crunching numbers?, It's all priced in the sp just follow the trend.....
> 
> Now first let me state I am not arguing against technical analysis but explaining why I prefer Fundamental Analysis for my money.
> 
> "Graham's favorite allegory is that of Mr. Market, a fellow who turns up every day at the stock holder's door offering to buy or sell his shares at a different price. Often, the price quoted by Mr. Market seems plausible, but often it is ridiculous. The investor is free to either agree with his quoted price and trade with him, or to ignore him completely. Mr. Market doesn't mind this, and will be back the following day to quote another price. The point is that the investor should not regard the whims of Mr. Market as determining the value of the shares that the investor owns. He should profit from market folly rather than participate in it. The investor is best off concentrating on the real life performance of his companies and receiving dividends, rather than being too concerned with Mr. Market's often irrational behavior."
> 
> Ok if you doubt the Mr Market allegory explain to me how CBA sp has fluctuated between $60.00 and $47.05 YTD.
> 
> The underlying business has not changed that much. Does Europe debt crisis and American recession really impact CBA's long term profitability?
> 
> 
> "Graham wrote that the owner of equity stocks should regard them first and foremost as conferring part ownership of a business. With that perspective in mind, the stock owner should not be too concerned with erratic fluctuations in stock prices, since in the short term, the stock market behaves like a voting machine, but in the long term it acts like a weighing machine (i.e. its true value will in the long run be reflected in its stock price). "
> 
> This is where it gets exciting, we know if we own part of a great business and that business by definition is delivering increasing profits the share price will eventually follow.
> 
> Now to really turbo charge your returns concentrate only on the top 1-2% quality companies and only buy them when they are under valued.





And a Chart is a record of the Pathology of Mr Market !

===>

''You cannot manage what you do not measure'' Peter Drucker

or take optimum advantage of--

You Cannot Make Money In A Stock By Yourself

http://www.clayallen.com/MD_NEWS_V9_I4.pdf

Motorway


----------



## Julia

robusta said:


> Julia what you are failing to 'get' is I am not dismissing trend folllowing or TA in general I have stated I believe it is a valid investment option.



So you did.  I should have read your post more carefully.  Sorry.



> The CBA example is to explain how value investing can take advantage of marker irrationality and fluctuations.



What does this statement actually mean?
Perhaps you could - using CBA - give a practical example of how 'value investing' is taking advantage of marker (market?) irrationality?
Do you simply mean buying in during dips?




> Maybe this is not the best medium to comminicate on I have only ever stated for MY money I am the most comfortable following Graham, Buffet et al.



And there are many who feel the same.  When I started out, I also liked the theory, but found in practice my investment could just sit there doing nothing while I waited for the rest of the market to wake up to the brilliance of the company.



> This is where it gets exciting, we know if we own part of a great business and that business by definition is delivering increasing profits the share price will eventually follow.



This is the bit I have difficulty with.   Perhaps the SP will indeed eventually follow, but until it does your money is just losing the opportunity to be gainfully engaged with another, rising, stock.  That's the advantage imo of trends.  Let the profits run and keep your losses small.


> If we never had a difference of opinion how would we ever learn anything?
> 
> I stick by my arguement that my 'that' style of investing is the best and further more would love to be proved wrong - would you?



There you go, robusta:  you're alleging that your style of investing is the best.
It may be best for you, but it's absolutely not best for everyone.  We'll all choose a style which fits our personality and experience, in addition to obviously being what we believe is the most profitable.

Would I love to be proved wrong?  I'm not interested in being proved right or wrong by anyone else's judgement other than my own.  I've tried various approaches and have settled on a mix which suits me.  I've no interest in wanting anyone else to adopt my approach.  I was simply suggesting that you might find if you broadened your view about possible approaches, you might find value in other than just so called value investing.

But hey, I don't care one way or the other.



So_Cynical said:


> robusta something that you must accept is that there's alot of trend followers on this forum (i call em trendy's ) in general these people buy trends and do that via whatever instrument is appropriate...while some types of trend following could be considered investing, on the whole its probably not realistic to call trendy's investors.
> 
> While im mostly in agreement with your comments re Mr market etc, i can also see the logic behind trend following and understand that both methods can be profitable....prob best to keep in mind that there's buyers and seller at all price levels, for all sorts of reasons.
> 
> 1 good thing about trend following is that its a discipline that anyone can learn, while not all personality's are ideally suited to following that discipline.



Good post, So Cynical.  Wow, don't get to say that too often.


----------



## So_Cynical

motorway said:


> And a Chart is a record of the Pathology of Mr Market !
> 
> ===>
> 
> ''You cannot manage what you do not measure'' Peter Drucker
> 
> or take optimum advantage of--
> 
> You Cannot Make Money In A Stock By Yourself
> 
> http://www.clayallen.com/MD_NEWS_V9_I4.pdf
> 
> Motorway




No disrespect motorway...but the has to be one of the most silly things ive ever read  i mean seriously.

"Portfolios heavy with under performing stocks almost never outperform the market....Ignat’s Law"

Well..no **** Sherlock.


----------



## motorway

His point is that many continue to hold portfolios of under performing stocks
(for some good?  reason ) as if ,they did expect to outperform with them..

Maybe because,
 of the Fundamentals
The broker recommendation
it is down
it is up
etc.

It is for anything==> But the performing
and here he means the trend vs all other stocks

The point is why invoke Mr Market
and then not keep tabs on him with charting and trend analysis ?

Motorway


----------



## robusta

Julia said:


> Perhaps you could - using CBA - give a practical example of how 'value investing' is taking advantage of marker (market?) irrationality?
> Do you simply mean buying in during dips?
> 
> I guess it could be looked at buying the dips. If I work out CBA has a intrinsic value of $54.00, the sp drops to $48.00 I buy and wait for the market to price the business at fair value.
> 
> And there are many who feel the same.  When I started out, I also liked the theory, but found in practice my investment could just sit there doing nothing while I waited for the rest of the market to wake up to the brilliance of the company.
> 
> This is where we differ. The price will eventually revert to the value of the underlying business, so if I can buy a business with a rising value at a bargain price eventually the price will catch up.
> 
> 
> This is the bit I have difficulty with.   Perhaps the SP will indeed eventually follow, but until it does your money is just losing the opportunity to be gainfully engaged with another, rising, stock.  That's the advantage imo of trends.  Let the profits run and keep your losses small.
> 
> Good luck and I am sure this technique makes a lot of people a lot of money. For me the return will be very satisfactory when the market finally catches up to the performance of great businesses.
> 
> There you go, robusta:  you're alleging that your style of investing is the best.
> 
> 
> It may be best for you, but it's absolutely not best for everyone.  We'll all choose a style which fits our personality and experience, in addition to obviously being what we believe is the most profitable.
> 
> You are correct I believe this technique is the best for me.
> 
> Would I love to be proved wrong?  I'm not interested in being proved right or wrong by anyone else's judgement other than my own.  I've tried various approaches and have settled on a mix which suits me.  I've no interest in wanting anyone else to adopt my approach.  I was simply suggesting that you might find if you broadened your view about possible approaches, you might find value in other than just so called value investing.
> 
> Thankyou I guess that is why I am on this thread, if I learn something or even better if someone can convince me of the merits of an alternate technique the bottom line is it is going to make me some money.
> 
> But hey, I don't care one way or the other.
> 
> 
> Good post, So Cynical.  Wow, don't get to say that too often.




Allways appreciate your opinion So Cynical (just don't allways agree with it)


Julia how do you do that multi quote thing like your reply to my quote?


----------



## Synergy

I have a couple of issues with fundamental analysis...

Example...
You buy a stock based on the information currently available to the market. The share price falls, with no information released to the market... You're holding exactly the same company, at a lower price. No dramas. The price continues to fall lower and lower.... But it's the same company, isn't it?

When does the share price fall so far that it is no longer the same company?

When is your analysis proved wrong?

Do you wait until the company releases news stating that their profits will be lower this year? Or that they're raising capital? before deciding it's not the same company anymore.

If you believe in purely fundamental analysis, then having a stop loss doesn't really make sense (it's still a good company), and averaging down makes a lot of sense. The same company at a cheaper price is surely a better buy than your initial purchase right??


Buying based on fundamental analysis means you think the share is either undervalued currently or you think it will increase in value in the future. Either way, from your analysis you believe you are 'right' when making the buy, otherwise you wouldn't make the trade. 
With technical trading - especially mechanical trading, it's not about being right when you buy, it's about being right in the long term, knowing that doing the same thing over and over will lead to profits. Whether you're right or wrong on any individual trade is of no real concern. 
I feel that with fundamental trading you're going into a trade thinking you're right, then having no real way to determine when your wrong. Mentally challenging at best.


----------



## Boggo

Synergy said:


> Buying based on fundamental analysis means you think the share is either undervalued currently or you think it will increase in value in the future. Either way, from your analysis you believe you are 'right' when making the buy, otherwise you wouldn't make the trade.




OneTel springs to mind in this topic.

The good old "It has to be good, Kerry and Rupert are investing in it" mob were all over it.

One fundamental positive that did come out of that was the fundamental analysts at StockDoctor identified it as a basket case and kept their clients out of it much to the disgust of KP at the time.

http://en.wikipedia.org/wiki/One.Tel


----------



## robusta

Synergy said:


> I have a couple of issues with fundamental analysis...
> 
> Example...
> You buy a stock based on the information currently available to the market. The share price falls, with no information released to the market... You're holding exactly the same company, at a lower price. No dramas. The price continues to fall lower and lower.... But it's the same company, isn't it?
> 
> When does the share price fall so far that it is no longer the same company?
> 
> When is your analysis proved wrong?
> 
> Do you wait until the company releases news stating that their profits will be lower this year? Or that they're raising capital? before deciding it's not the same company anymore.
> 
> If you believe in purely fundamental analysis, then having a stop loss doesn't really make sense (it's still a good company), and averaging down makes a lot of sense. The same company at a cheaper price is surely a better buy than your initial purchase right??
> 
> 
> Buying based on fundamental analysis means you think the share is either undervalued currently or you think it will increase in value in the future. Either way, from your analysis you believe you are 'right' when making the buy, otherwise you wouldn't make the trade.
> With technical trading - especially mechanical trading, it's not about being right when you buy, it's about being right in the long term, knowing that doing the same thing over and over will lead to profits. Whether you're right or wrong on any individual trade is of no real concern.
> I feel that with fundamental trading you're going into a trade thinking you're right, then having no real way to determine when your wrong. Mentally challenging at best.




You make some very good points Synergy.

The price in the short term often has nothing to do with the performance of the company. I need to make a distinction between price and value. Price is what I pay, value is what I get.

I have to wait until news is released to the market to prove my analysis wrong, this makes me more disciplined in company selection.

Good point about being right in the long term, that is the key for both techniques.

Right again about the stop losses - I don't have any.

Also right again about the averaging down. Never do this lightly but if you proceed with due dilligence the results can be very satisfactory.



Boggo said:


> OneTel springs to mind in this topic.
> 
> The good old "It has to be good, Kerry and Rupert are investing in it" mob were all over it.
> 
> One fundamental positive that did come out of that was the fundamental analysts at StockDoctor identified it as a basket case and kept their clients out of it much to the disgust of KP at the time.
> 
> http://en.wikipedia.org/wiki/One.Tel




Good point about OneTel so much money in a company that never turned a profit. Would never make it into my portfolio.


----------



## robusta

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

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

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

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

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

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

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

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

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


----------



## So_Cynical

Synergy said:


> I have a couple of issues with fundamental analysis...
> 
> Example...
> You buy a stock based on the information currently available to the market. The share price falls, with no information released to the market... You're holding exactly the same company, at a lower price. No dramas. The price continues to fall lower and lower.... But it's the same company, isn't it?
> 
> When does the share price fall so far that it is no longer the same company?
> 
> When is your analysis proved wrong?
> 
> Do you wait until the company releases news stating that their profits will be lower this year? Or that they're raising capital? before deciding it's not the same company anymore.
> 
> If you believe in purely fundamental analysis, then having a stop loss doesn't really make sense (it's still a good company), and averaging down makes a lot of sense. The same company at a cheaper price is surely a better buy than your initial purchase right??
> 
> 
> Buying based on fundamental analysis means you think the share is either undervalued currently or you think it will increase in value in the future. Either way, from your analysis you believe you are 'right' when making the buy, otherwise you wouldn't make the trade.
> With technical trading - especially mechanical trading, it's not about being right when you buy, it's about being right in the long term, knowing that doing the same thing over and over will lead to profits. Whether you're right or wrong on any individual trade is of no real concern.
> I feel that with fundamental trading you're going into a trade thinking you're right, then having no real way to determine when your wrong. Mentally challenging at best.




All very valid points of course and not the first time ive read them, and every time i read them i get an overwhelming feeling that trend following and mechanical trend following in particular is very much about decision avoidance and acceptance of losses.

Trendy's seem to want to treat the market (ASX) like 2000 roulette wheels (with no numbers) all spinning at once or perhaps more like 2000 events that somehow randomly trend, they seem to use the unpredictability of the market as an excuse to not bother trying to understand it..a few Homer Simpson quotes come to mind.


 “Trying is the first step to failure”
 “You tried your best and failed miserably. The lesson is: never try.”
 “If at first you don't succeed, give up.”

Just thinking back over the last 3 years i can honestly say that every time ive averaged down (except for 2 times) i have substantially reduced my open losses and 4 times i have pretty much turned a losing trade/position into a neutral/winning trade....what i love about the stock market is that there's so much information, there's so many variables.

i love building a picture of a stock in my mind as i read thru reports and announcements, charts and stats...that's the best bit, well not true because the best bit is getting it right and coming out the other end winning...like i did today with IMF, i watched for over a year, waited, saw a potential bottom 4 weeks ago and after a 2 or 3 hour final research session i jumped in...out today with a 10% profit, no trend needed.


----------



## So_Cynical

robusta said:


> Disclosure 4 of these stocks are also in Roger Montgomery's Valeline portfolio.
> 
> 
> It would also be interesting to get any input from any other points of view to see any correlation between different investment techniques. Or if anyone wants to put up a alternative portfolio?
> 
> CBA       $50.50
> CSL       $32.50
> JBH       $19.59
> MCE      $4.95
> FGE       $4.05
> FRI        $1.40
> 
> Portfolio total $112.99       ASX 200 4694.90   20/10/2010




Why did you leave out PTM? 

Give me a day or 2 and ill put 6 of my portfolio stocks up against yours. :


----------



## robusta

So_Cynical said:


> Why did you leave out PTM?
> 
> Give me a day or 2 and ill put 6 of my portfolio stocks up against yours. :




Will look forward to it.

Disclosure I hold the 6 stocks in this portfolio but never managed to pick up PTM at a cheap enough price.

Well done with IMF by the way, I am lightyears from being able to pull off a trade like that.


----------



## Julia

robusta said:


> Julia how do you do that multi quote thing like your reply to my quote?



See this thread:
https://www.aussiestockforums.com/forums/showthread.php?t=2737
Do learn how to do it.  It makes replying to a post much easier and much clearer for readers.



robusta said:


> Being a fundamental investor I miss out on many opportunities to make money open to technical investors.



So why are you so happy to accept these lost opportunities?



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



I'd say not all of them by any means.  WDC is a good example of a stock widely quoted to be necessarily included in any basic p/f but just looking at the last three years it has been in a downtrend then flat for some time.
Doubt too many have made too much from this.



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



Quite so.  But you still are telling us value investing is better!




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



Yeah, yeah, we all know the definition.




> I thought it may be interesting to list 6 businesses that meet my criteria and I think should out perform the market in the long term.
> Disclosure 4 of these stocks are also in Roger Montgomery's Valeline portfolio.
> These businesses are all about or below current intrinsic values.
> 
> If I assume a equally weighted portfolio and track it against the ASX 200 it should be interesting to see the results over the medium to long term.
> 
> It would also be interesting to get any input from any other points of view to see any correlation between different investment techniques. Or if anyone wants to put up a alternative portfolio?
> 
> CBA       $50.50
> CSL       $32.50
> JBH       $19.59
> MCE      $4.95
> FGE       $4.05
> FRI        $1.40
> 
> Portfolio total $112.99       ASX 200 4694.90   20/10/2010



Now this actually becomes interesting with regard the last three, all of which look very healthy indeed.  How did you come up with these, robusta?
Seems like an instance where trend following and 'value investing' might coincide.

CSL is another that seems to be dumped into most p/f's, despite it being flat for three years.

JBH was a fantastic buy if you bought it Nov 09.  Not so keen on it now.

What does this mean:


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



What does the $112.99 refer to?



So_Cynical said:


> All very valid points of course and not the first time ive read them, and every time i read them i get an overwhelming feeling that trend following and mechanical trend following in particular is very much about decision avoidance and acceptance of losses.



What absolute nonsense.
Decision avoidance?  On the contrary it's absolutely about making a decision about when to enter and exit.

But if it turns out to be a wrong decision, then yes absolutely I'll accept a small loss, rather than watch a stock viz. TLS descend into oblivion.



> Trendy's seem to want to treat the market (ASX) like 2000 roulette wheels (with no numbers) all spinning at once or perhaps more like 2000 events that somehow randomly trend, they seem to use the unpredictability of the market as an excuse to not bother trying to understand it..a few Homer Simpson quotes come to mind.



You're absolutely entitled to choose your own method, but there's no need to sneer at alternative approaches.  I'm resisting the temptation to recall some of your previously posted profits which many trend followers would consider immaterial.



> i love building a picture of a stock in my mind as i read thru reports and announcements, charts and stats...that's the best bit, well not true because the best bit is getting it right and coming out the other end winning...like i did today with IMF, i watched for over a year, waited, saw a potential bottom 4 weeks ago and after a 2 or 3 hour final research session i jumped in...out today with a 10% profit, no trend needed.



In the meantime, instead of watching something for over a year, and doing all that tedious research, you could have been in and out of multiple stocks with more than a 10% profits each time if you took a different approach.

But hey, so cynical, glad you have a method which makes you happy.
That's all any of us aspire to, I guess.  Just that we have different criteria for happiness.

(I knew it was a fluke that I actually agreed with one of your previous posts!)


----------



## So_Cynical

Julia said:


> You're absolutely entitled to choose your own method, but there's no need to sneer at alternative approaches.  I'm resisting the temptation to recall some of your previously posted profits which many trend followers would consider immaterial.




I really wasn't sneering, just stating my observations of trend following without malice.

-------------

While many of my profits may be small they are also consistent, and because there consistent they don't have to be spectacular...any time i can make 10% on a trade in 4 weeks ill take it, because that's how my portfolio has grown by 34% in the last 12 months.

Trendy's need to make the most of there winners because they have so many losers....i can take 10 and 15% profits because i have lots of winners and the sooner i turn my money over the sooner i get the next winner.

By the way Julia...hows that 8% Term deposit working out for you? :


----------



## So_Cynical

robusta said:


> It would also be interesting to get any input from any other points of view to see any correlation between different investment techniques. Or if anyone wants to put up a alternative portfolio?
> 
> CBA       $50.50
> CSL       $32.50
> JBH       $19.59
> MCE      $4.95
> FGE       $4.05
> FRI        $1.40
> 
> Portfolio total $112.99       ASX 200 4694.90   20/10/2010




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


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

Portfolio total $18.84 were gona include dividends in this?


----------



## brty

Just remember that comparing the performance of a few stocks with an index like the All Ords, is not very real as the index is weighted, not all stocks are equal.

Simply picking 4 or 6 stocks (unweighted) to compare to the index will end up with results all over the shop, but is likely to outperform both on the upside and downside depending on which way the index goes. The real test is if the stocks proposed outperform to the upside while the index declines.

Good luck.

brty


----------



## tech/a

The only thing that matters in my view if you hold a portfolio of 1 or 50 stocks is that over a given period you can profit from that portfolio to an extent greater than you could have invested the moneys elsewhere.


----------



## Tysonboss1

tech/a said:


> The only thing that matters in my view if you hold a portfolio of 1 or 50 stocks is that over a given period you can profit from that portfolio to an extent greater than you could have invested the moneys elsewhere.




I think if you hold more than 20 stocks it becomes difficult to out perform the market, so it my be easier to just hold an index fund.


----------



## tech/a

Tysonboss1 said:


> I think if you hold more than 20 stocks it becomes difficult to out perform the market, so it my be easier to just hold an index fund.




Was just making a point perhaps with a little too much exhuberance.


----------



## Tysonboss1

Synergy said:


> When is your analysis proved wrong?




When there is a material long term change in the companies earning power or ability to continue to generate share holder returns.

If a company is generating strong cashflows and using these effectively to fund growth the share price will eventually follow.


----------



## Tysonboss1

*Re: Technical Analysis vs Fundamental Analysis*



Rafa said:


> actually there is a higher level of maths in technical analysis than in fundamental analysis...
> 
> fundamental analysis (and accounting) is just addition, subtraction, multiplication and division, the stuff you learn in primary school...
> 
> !




Thats must be why I favor fundamental analysis, Addition, subtraction, multiplication and division is the limits of my skills,

Trend following and T/A are both short term tools suited to traders.

Investing however requires a much more longterm approach, and T/A doesn't quite cut the mustard for a longer time frame.

Each to his own, we need both traders and investors in the market and each will use the right tool for the job, ( hopefully ).


----------



## Julia

So_Cynical said:


> Trendy's need to make the most of there winners because they have so many losers....i can take 10 and 15% profits because i have lots of winners and the sooner i turn my money over the sooner i get the next winner.



This is the sort of silly remark that irritates me.  You don't know any such thing.  Give some proof of this allegation which, as far as I'm concerned, is nonsense.

There should be no reason why we cannot have a sensible discussion about different approaches.  Why is there always this competitive sniping that's so childish?   Newbies are going to be reading this thread and, instead of learning something, are probably going to be simply confused.




> By the way Julia...hows that 8% Term deposit working out for you? :



I'm very happy indeed about it, given that rates have since fallen considerably.
You don't imagine I have locked all my cash away in a term deposit, do you?

Just on the passivity of having funds in cash, though, the last several months is the first time for years that I've had quite a bit still in cash and it's surprisingly addictive!   Don't have to think about it, no decisions to make, while it quietly produces more than enough to live on.  Certainly not a long term proposition, but it's very comfortable for while.



Tysonboss1 said:


> Investing however requires a much more longterm approach, and T/A doesn't quite cut the mustard for a longer time frame.
> 
> Each to his own, we need both traders and investors in the market and each will use the right tool for the job, ( hopefully ).



Tyson, I understand what you're saying here, but trend following doesn't necessarily imply short term trading.  If a stock continues in a steady uptrend, there's no reason not to hold it indefinitely.

Agree absolutely there's a place for different approaches, which is why the competitive sniping is so silly.


----------



## So_Cynical

Julia said:


> This is the sort of silly remark that irritates me.  You don't know any such thing.  Give some proof of this allegation which, as far as I'm concerned, is nonsense.
> 
> There should be no reason why we cannot have a sensible discussion about different approaches.  Why is there always this competitive sniping that's so childish?   Newbies are going to be reading this thread and, instead of learning something, are probably going to be simply confused.




Perhaps your individual style of trend following differs from the mainstream of trend following? i thought it was common knowledge that trend followers typically have more losers than winners....necessitating the need to never average down, accept small (5% losses) and move on etc.

My key understanding of trend following is that the rules must be followed at all times, somewhat mechanically....and its the following of all these rules that enables the trend follower to profit even thought the majority of trades are losers.

Perhaps ive got it all wrong. :dunno:

--------------

As far as im concerned this is a sensible enough discussion and its probably best if you consider my "sniping" to be more light hearted as intended.


----------



## Boggo

Hey So_Cynical.

I will post my trading account technical analysis closed results and current open positions for this FY if you will post the same for yours based on fundamental analysis for this FY.

I'm game


----------



## tech/a

So_Cynical said:


> Perhaps your individual style of trend following differs from the mainstream of trend following? i thought it was common knowledge that trend followers typically have more losers than winners....necessitating the need to never average down, accept small (5% losses) and move on etc.
> 
> My key understanding of trend following is that the rules must be followed at all times, somewhat mechanically....and its the following of all these rules that enables the trend follower to profit even thought the majority of trades are losers.
> 
> *Perhaps ive got it all wrong.* :dunno:
> 
> --------------
> 
> As far as im concerned this is a sensible enough discussion and its probably best if you consider my "sniping" to be more light hearted as intended.




If you have a winning trade Ill guarentee youve been riding a trend.
REGARDLESS of length of time---dont care what analysis you use.
Price has to have moved to above your entry price to reap a profit. (If trading long) wether that be in 5 minutes or 5 years.

The arguements are really stupid no point in arguing.

All anyone does in any form of analysis is place themselves in a position of potential profit which in the end proves correct or incorrect.

Nothing wrong with being in correct its the length of time you STAY incorrect which is important.


----------



## Boggo

Good post tech/a.

Because my 1000th post addresses your 9000th post I think I should probably retract my 999th post as it wouldn't really prove anything 

Cheers


----------



## So_Cynical

Boggo said:


> Hey So_Cynical.
> 
> I will post my trading account technical analysis closed results and current open positions for this FY if you will post the same for yours based on fundamental analysis for this FY.
> 
> I'm game




Id like to think that fundamental analysis is only a small factor in my investment decisions and i certainly don't consider myself a spokes person for the cause or a follower of the method, i class myself as a discretionary investor.

i post all my buys and sells in the relevant stock threads either on the day of sale or the day after so im very open and transparent in my investment activity's....while im sure we would all like to see your trading results i doubt whether mine would be of equal interest.

Anyway my FY10/11 results (7 sells and 4 buys) reflects my low level of activity, the last 12 months would at least give me something to write about, and be a more interesting comparison on a percentage basis at least.



Boggo said:


> Good post tech/a.




Tech certainly has a way of cutting thru the crap.


----------



## tech/a

> Nothing wrong with being in correct its the length of time you STAY incorrect which is important




This by the way is a Radgeism.
Not my original knife work.
Sifu Radge is the master.


----------



## robusta

Julia said:


> See this thread:
> https://www.aussiestockforums.com/forums/showthread.php?t=2737
> Do learn how to do it.  It makes replying to a post much easier and much clearer for readers.!)





Thankyou very much I Julia finally got it.



Julia said:


> So why are you so happy to accept these lost opportunities?




That is just the thing I dont see them as lost opportnities.
Maybe a example would explain it better.
 Back to the "short term voting machine, long term weighing machine" idea of the market.
If I can find a business with a intrinsic value of $1.00 this year, $1.20 next year and $1.44 the year after and the sp is currently $0.80 that to me is a great investment. 
The sp could sit at $0.80 for a year, it could drop like a stone to $0.50 I have no idea what it will do short term, nor do I waste any energy trying to work it out.  But eventually I am convinced the sp will reflect the value of the underlying business and my portfolio will earn very satisfactory returns.[/QUOTE]






Julia said:


> Now this actually becomes interesting with regard the last three, all of which look very healthy indeed.  How did you come up with these, robusta?
> Seems like an instance where trend following and 'value investing' might coincide.




Yes I imagine we will often make money from the same stocks. These businesses (MCE, FGE, FRI) were all selected because they are all great businesses and at a discount to intrinsic value.
Take FRI as a example. I worked out intrinsic value is about $1.80 this year rising to $2.16 next year. Entry point a couple of months ago $1.06



Julia said:


> CSL is another that seems to be dumped into most p/f's, despite it being flat for three years.




SP could be flat for another couple of years but the intrinsic value is rising. CSL was expensive three years ago but the value has caught up with the sp



Julia said:


> JBH was a fantastic buy if you bought it Nov 09.  Not so keen on it now..




The best of JBH growth is behind it, but still plenty more to come.



Julia said:


> What does this mean:
> What does the $112.99 refer to?




That is me being tired and not thinking clearly. OK to compare a equally weighted portfolio to a indice you can not just add up all the sp x one stock of each and compare changes in that total to the indice. A child would know a small % change to a $50.00 stock would move the total more than a larger % change to a $0.50 stock. 
To track this portfolio I will either have to start with say $1000 of each stock or track the % change of each stock and work out the average.


----------



## robusta

So_Cynical said:


> Ok here is my 6 at today's close (i own stocks with *)
> 
> 
> BPT   0.615*
> CPU   9.71*
> TSI   0.665*
> PTM   4.75*
> CIF   1.15
> APN   1.95
> 
> Portfolio total $18.84 were gona include dividends in this?




Intersting portfolio CPU and PTM I particularily like. Getting a bit late now but I would like to do a bit of research and put forward my thoughts on these.

Up to you with the dividends, maybe if not to hard we could come up with two numbers, capital gains or losses and total portfolio return.

How often do you want to update it monthly?, quarterly?


----------



## Julia

robusta said:


> Back to the "short term voting machine, long term weighing machine" idea of the market.
> If I can find a business with a intrinsic value of $1.00 this year, $1.20 next year and $1.44 the year after and the sp is currently $0.80 that to me is a great investment.
> The sp could sit at $0.80 for a year, it could drop like a stone to $0.50 I have no idea what it will do short term, nor do I waste any energy trying to work it out.  But eventually I am convinced the sp will reflect the value of the underlying business and my portfolio will earn very satisfactory returns.



OK, so let's say you buy this stock at 80 cents.   Above you discuss its potential rise alongside what you see as the intrinsic value after two years of $1.44.
What would you therefore expect the SP to be to represent your 'great investment' at the end of this two year period?

What would the stock have to fall to, below your 80 c purchase price, for you to sell it?

Do you have a set percentage profit on your 80c per share at which point you will sell it?   Or is this open ended?


> SP could be flat for another couple of years but the intrinsic value is rising. CSL was expensive three years ago but the value has caught up with the sp



So given that it has been flat for so long and is showing no signs of rising, how are you making money here?   I haven't checked, but I have a vague memory that CSL's yield is pretty low, so you wouldn't be holding it for the yield.


----------



## robusta

Julia said:


> OK, so let's say you buy this stock at 80 cents.   Above you discuss its potential rise alongside what you see as the intrinsic value after two years of $1.44.
> What would you therefore expect the SP to be to represent your 'great investment' at the end of this two year period?




I would expect the SP to be a lot closer to $1.44 but it would not bother me too much if the SP was still lower as long as the IV of the business was still rising at a satisfactory rate. It could take five years. If after three years for example the IV was $1.72 (I am using 20% compounded by the way) I would still hold on and eventually the return would come. Also remember the entry point of $.80 gives both margin of safety and turbo boosted returns.



Julia said:


> What would the stock have to fall to, below your 80 c purchase price, for you to sell it?




All things being equal if the sp falls significantly I would buy more. If it was a bargain at 80c how much more of a bargain at 50c. 25c? good grief Christmas time time to go in boots n all



Julia said:


> Do you have a set percentage profit on your 80c per share at which point you will sell it?   Or is this open ended?




Tysonboss put it better than me.



Tysonboss1 said:


> When there is a material long term change in the companies earning power or ability to continue to generate share holder returns.
> 
> If a company is generating strong cashflows and using these effectively to fund growth the share price will eventually follow.




The only other two reasons I would have to sell are:

1) The share price moves significantly ahead of the IV. ie the company is overvalued

2) There is a bigger bargain to be found. (see example above)




Julia said:


> So given that it has been flat for so long and is showing no signs of rising, how are you making money here?   I haven't checked, but I have a vague memory that CSL's yield is pretty low, so you wouldn't be holding it for the yield.




Must admit CSL does bother me a bit. Have held it for 6 months and did not buy at significant discount to IV. (got greedy for future growth broke my rule re margin of safety). I am looking for capital gain with this business I guess I will have to answer your question in a couple of years.


----------



## So_Cynical

robusta said:


> Intersting portfolio CPU and PTM I particularily like. Getting a bit late now but I would like to do a bit of research and put forward my thoughts on these.
> 
> Up to you with the dividends, maybe if not to hard we could come up with two numbers, capital gains or losses and total portfolio return.
> 
> How often do you want to update it monthly?, quarterly?




I'm going to put our selections in a couple of watchlist's so its easy to keep track of, best to include dividends and distributions...im probably gona need em.



robusta said:


> Must admit CSL does bother me a bit. Have held it for 6 months and did not buy at significant discount to IV. (got greedy for future growth broke my rule re margin of safety). I am looking for capital gain with this business I guess I will have to answer your question in a couple of years.




If you have a look a few pages back in the CSL thread you will find my trades  in fact i just remembered i posted a chart of my trades that ill post up just for the hell of it...buy in green selling in red.
~





~
With CSL ya really need to be buying the bottom of the range (under $30.30)...considering how its ranged for over 2 years.  one of my better trades, pretty much bottom to top.  just another winner posted in real time.


----------



## skc

So_Cynical said:


> If you have a look a few pages back in the CSL thread you will find my trades  in fact i just remembered i posted a chart of my trades that ill post up just for the hell of it...buy in green selling in red.
> ~
> 
> 
> 
> 
> ~
> With CSL ya really need to be buying the bottom of the range (under $30.30)...considering how its ranged for over 2 years.  one of my better trades, pretty much bottom to top.  just another winner posted in real time.




I like to know how people work out the intrinsic value of CSL... in order to do that you will need to make some fairly long dated assumptions about exchange rates and blood plasma prices, not to mention take a view on the court case they have in US.

Certainly not easy and it will at best give you a range of values... and I dare say that buying at $30 and selling at $35 is unlikely to be true fundamental-driven investment, given the uncertainties involved.

To me So_C's strategy seems to be to "trade" only a small universe of stocks which he believed/researched to be fundamentally sound companies, then buy at support levels based on chart. It feels very much like a hybrid FA and TA strategy... Or in simpler terms - swing trading good companies by buying support and selling resistance.

Nothing wrong with that - just wondering if that's something anyone else has picked up.


----------



## Julia

Agree, if the CSL management is an example.  If you had a decent no. of shares there, So Cynical, that was well done.  Presumably you sold half at the earlier point and then the rest at the top of that chart?

I suspect many of us do things more similarly than it may at first seem, just describe it differently.

I'm tempted to respond to Robusta's philosophy of the brilliance of averaging down, but might leave it alone.  Someone else might be brave enough to take this up?


----------



## moreld

The problem with averaging down is that you end up with the largest investment in your greatest losers. 
Even great investors are only right about 70% of the time, so sticking firmly to a mantra of averaging down will soon see you getting your fingers seriously burnt.

If your follow a FA approach, which I do in the main, if a stock falls a significant percentage it is wise to redouble your research. If you can't determine why others are valuing it lower than you and why it is falling then you really don't understand the company and what is happening. Too many investors delude themselves that they're Bill Miller, Warren Buffett, Seth Klarman and so on and KNOW what the intrinsic value of a company is. IV is a philosophy not a hard knowable $ amount.

While I think buying with a margin of safety is a smart high probability way to success, realising that you're often wrong and can always buy back later if you sell will save you from some major disasters.

Each to their own.


----------



## Boggo

moreld said:


> The problem with averaging down is that you end up with the largest investment in your greatest losers.




Did that once on a delightful stock called AED (still going), only once, never again.

It was probably the best $9000 + that I have ever spent (lost) because it has saved me far more than that since then.

I have to laugh when I see people write about how they average down or when they say that they are funnymentalists and then put up a chart of what price they usually enter at because the chart shows what range it usually bottoms at


----------



## tech/a

Boggo said:


> Did that once on a delightful stock called AED (still going), only once, never again.
> 
> It was probably the best $9000 + that I have ever spent (lost) because it has saved me far more than that since then.
> 
> I have to laugh when I see people write about how they average down or when they say that they are funnymentalists and then put up a chart of what price they usually enter at because the chart shows what range it usually bottoms at




My favourite is.
It was a bargain when I bought its and now its 50% less its an absolute gift.

If anyone remembers or saw Ducati's 2 yr attempt to buy value and prove the very same point argued here (I've looked but cant find it in the archives) they will understand the folly first hand---unless of course your like Boggo and excelled yourself.


----------



## professor_frink

here you go:

fundamental positions II


----------



## Julia

Thanks, Prof Frink.  Ah, what memories that thread revives.
Wonder what Duc is doing these days.  Does anyone hear from him?


I shudder when I think of all those folk who faithfully averaged down while their chosen stock sank into oblivion.


----------



## Julia

Further to above post, two of the market darlings, ABC Learning and Babcock and Brown were great examples of where investors averaging down came to a very sticky end.

They are both deleted from E-trade now so I can't find a decent chart demonstrating their woeful descent.  Below is best I can find now.



> Babcock & Brown was a global investment and advisory firm based in Sydney, Australia. It was best known in financial markets for structured finance deals that is currently in liquidation. The company had at its peak 28 offices and in excess of 1,500 employees worldwide. Although headquartered in Sydney, it had a significant presence in Europe and the United States. The creditors of Babcock &  Brown voted to place the company into liquidation on August 24, 2009.
> 
> At the end of 2006, Babcock had a market capitalisation of just over $8.5 billion, and in 2007 its market capitalization peaked above $9.1 billion (AU$33.90 per share). However by October 2008 the share price had collapsed by 96% to AU$1.40[1] and by December 2008 by 99.6% to AU$0.14, representing a market capitalisation of less than $50 million. On March 13, 2009 the company was placed into voluntary administration. [2] Approximately 45% of its shares were owned by the executives of the firm.


----------



## skc

Julia said:


> Further to above post, two of the market darlings, ABC Learning and Babcock and Brown were great examples of where investors averaging down came to a very sticky end.
> 
> They are both deleted from E-trade now so I can't find a decent chart demonstrating their woeful descent.  Below is best I can find now.




While I don't necessarily agree with averaging down, I have to say that the rule to average down is to average down only on fundamentally sound companies...

Given that both companies went belly up, whoever thought they were fundamentally sound were dead wrong. And whoever averaged down on them were either ignorant of the rule of averaging down, or got their analysis wrong.

Noting incorrect fundamental analysis doesn't equate to fundamental analysis does or doesn't work.

There is no doubt however that the inclusion of stop loss is good risk management for those who have inadequate fundamental analysis skills. It will generate a lot of false negatives, but save you from some disasters at the same time.


----------



## moreld

Julia said:


> Wonder what Duc is doing these days.



Duc regularly blogs at http://leduc998.wordpress.com/ I confess to finding it hard to follow his thoughts and reasoning.


----------



## Tysonboss1

Julia said:


> Further to above post, two of the market darlings, ABC Learning and Babcock and Brown were great examples of where investors averaging down came to a very sticky end.
> .




Neither of those to stocks would have passed a true value investors tests. 

Value investing is not about buying stock just because it's price has fallen. Their is some common misconceptions here about value investors, These misconceptions are made worse by people who call them selves value investors or fundamnetal investors who are not investors at all. a better description of them would be recovery speculaters or sector gamblers.

a person who says either of the following things is not a value investor or fundamental investor.

1, "Stock in XYZ company has had a big fall so now it is cheap compared to it's highs, so I am going to load up because I am a value investor."

or,

2, "I have a hunch the coal price will go up in coming years, so I will buy coal stocks because I am a fundamental investor"


----------



## ducati916

et al,

I'm still about, mostly, as indicated on my blog, unless a topic catches my eye. 

With regards to the fundamentals, what became quite apparant was that the macro-picture has an enormous influence on the micro [individual stock value] and purchasing value, however defined, against the macro-picture, will make for a very difficult holding period.

jog on
duc


----------



## ducati916

moreld said:


> Duc regularly blogs at http://leduc998.wordpress.com/ I confess to finding it hard to follow his thoughts and reasoning.




Surely I'm not that obtuse?

jog on
duc


----------



## Boggo

Tysonboss1 said:


> Neither of those to stocks would have passed a true value investors tests.
> 
> Value investing is not about buying stock just because it's price has fallen. Their is some common misconceptions here about value investors, These misconceptions are made worse by people who call them selves value investors or fundamnetal investors who are not investors at all. a better description of them would be recovery speculaters or sector gamblers.
> 
> a person who says either of the following things is not a value investor or fundamental investor.
> 
> 1, "Stock in XYZ company has had a big fall so now it is cheap compared to it's highs, so I am going to load up because I am a value investor."
> 
> or,
> 
> 2, "I have a hunch the coal price will go up in coming years, so I will buy coal stocks because I am a fundamental investor"




Precisely, some of the stocks mentioned by so called fundamental or value investors are just stocks that have been good or are popular and everyone knows them.
I haven't seen any mention of any of the top fundamentally sound stocks at the moment such as SUL and MND.
Technical analysts would be more familiar with them and are probably making good money from them while others debate the pros and cons of TLS or CSL 

The charts will tell you very quickly whether they are fundamentally sound or not.

Rant over


----------



## Tysonboss1

Boggo said:


> The charts will tell you very quickly whether they are fundamentally sound or not.
> 
> Rant over




I don't aggree, the two stocks mentioned earlier "ABC and BABCOCK", at some point (atleast by the charts) seemed like wonderful investments, but they were not.

T/A will only show you what the shorterm mood of a stock is, not whether it is a good longterm investment. which depending on your stratergy might be what you are after.

I think one of the virtues of true fundamental analysis is that it shows you what "not" to buy even through the hype of such things as the tech boom. And alot of the time it's the things you turn down that are more important than the things you say yes to.


----------



## moreld

ducati916 said:


> Surely I'm not that obtuse?
> duc



 I fear the failing is mine.


----------



## Boggo

Tysonboss1 said:


> I don't aggree, the two stocks mentioned earlier "ABC and BABCOCK", at some point (atleast by the charts) seemed like wonderful investments, but they were not.
> 
> T/A will only show you what the shorterm mood of a stock is, not whether it is a good longterm investment. which depending on your stratergy might be what you are after.




BNB, the chart told the real story 12 months before the demise...
https://www.aussiestockforums.com/forums/showpost.php?p=326300&postcount=640


----------



## Tysonboss1

Boggo said:


> BNB, the chart told the real story 12 months before the demise...
> https://www.aussiestockforums.com/forums/showpost.php?p=326300&postcount=640




I don't know about babcock but abc was clearly a loser for years fundamentaly


----------



## ducati916

moreld said:


> I fear the failing is mine.




Ahhhh, I feel so much better now.

jog on
duc


----------



## Julia

Boggo said:


> BNB, the chart told the real story 12 months before the demise...
> https://www.aussiestockforums.com/forums/showpost.php?p=326300&postcount=640



Thanks, Boggo.  I should have thought to look on the BNB thread for a chart.



Tysonboss1 said:


> I don't know about babcock but abc was clearly a loser for years fundamentaly



Yes, you're right.  They expanded too rapidly and too far on too much debt.
However, some people did make some decent money out of it on the way up.


----------



## ducati916

A current example: CST

Now I don't really follow the ASX that closely at all, except for this one stock that I have had an ongoing beef with for about 4yrs now, previously it was VCR which essentially went bankrupt.



> Looking at the 2009 Financials, which may be a little behind the curve now the following problems present: _ It looks very possible that CST are reclassifying Receivables [ii] Inventory may be obsolete, or CST may have failed to charge full costs under COG line entry, this latter is the more likely as it is again raised [confirmed] elsewhere.
> 
> Again, accounting issues abound with this company, which was my original objection to it prior to it actually having any sales. Now that it has sales, the accounting shenanigans continue in a different form.
> _



_




			I haven't read the reports from Lincoln that you mention, so my analysis may address points they have covered, or it may not. Also I have not undertaken an in depth analysis at this point, but may well do so if it seems to be required.

Essentially I have looked at 6 initial line entires:
*Revenues
*Cost of Goods
*Receivables
*Inventories
*Ratio of Net Income/Cash from Operations

Year..........................2008/2009......................2009/2010
Revenues.....................+83%..............................+17%
Cost of Goods...............+67%..............................+19%
Receivables..................+67%.............................+24%
Inventories...................+115%...........................[-13%]
Ratio.............................................................1.50

Bearing in mind my previous comments on the 2008/2009 Financial Statements, I'll now add some comment to the 2009/2010 Financial Statements.

When Receivables grow faster than Sales, then immediately I suspect aggressive Revenue recognition. This assertion is further underlined by the ratio analysis which shows an overstatement of Income. This analysis is further supported by the growth in Accts. Pay. which has exceeded Revenues, which indicates a failure to pay fully for Inventory and will reduce earnings in future periods [while concurrently overstating Net Income, which has already been flagged]

We also have a margin compression with COG exceeding Revenues. This indicates pricing pressure, and for a new company [new as in newly profitable] this is a major issue.

Inventories have compressed dramatically, with a concurrent fall in Revenue growth, which is suggestive of Inventory writedowns, which would have been flagged in the 2008/2009 financials, although I haven't looked for the notes in the current financials that may disclose this.

Anyway, that's simply a very cursory analysis and I suspect if I really dug deeply I could uncover all manner of egregious behaviour by management, these indiscretions would however give me significant pause.
		
Click to expand...






			I have continued to focus upon the Inventory, Receivables, Accounts Payable line entries.

Collections: the data here analyses the success/failure of the collection of Receivables. Slowing collections are an early indicator of credit problems which lead to cashflow problems.

2008/2009.................0.92
2009/2010.................0.97

So far so good. As an example Dell Computer used to run Collection ratios 1.22 etc, as it collected payment before shipping product, before even building product. Anyhow, on the surface, good. The ratio is improving.

An analysis of Receivables.

2008...........................172
2009...........................192
2010...........................200

Houston, we have a problem. The Accts. Rec. are deteriorating. While the collection ratio is improving, viz. less debt default, the time taken is increasing. The Company would seem to be offering more generous credit terms to its better customers.

An analysis of Accts. Pay.

2008........................78.2
2009........................52.7
2010........................54.9

CST's creditors however are not as patient. They, in the tightening business conditions, demand payment significantly faster, which always has cashflow implications.

Inventory analysis

2008.......................16.5
2009.......................19.4
2010.......................14.4

Here we see a deterioration. The inventory turnover has slowed. This is the source of much of CST's problems, they simply are not moving product at the same pace. Despite the spin of the company spokesperson, this is not good. Combined with the previous analysis, this would for me definitely constitute an early warning sign.

Now when you look at the price chart, you see already a decline in the shareprice. This strikes me as somewhat odd. Odd because the new financial data came out approximately 20 days ago, and the data is not immediately obvious to be bad, there are still incredibly optimistic people on this forum.

Of course the stock might simply be tightening its correlation to the ASX index, and the ASX to the US indices, and may be no more than that. However, for those interested, an analysis of Insider trading might be illuminating. I haven't as yet looked at the intangible elements, I'm still plodding through the numbers.
		
Click to expand...






			Further analysis reveals that from the $763 allocated to CapEx. $15.26 went elsewhere. This represents a hidden cashflow. Now, whether this hidden cashflow redounds to shareholders or to management isn't at this point entirely clear. Regardless, I do not like to see hidden cashflows, it always makes me suspicious as to what else is being obsfucated.
		
Click to expand...






			No same figures, simply a different way of approaching the analysis. You are simply looking at a vertical analysis, as such your numbers are correct. I am however looking at a horizontal analysis and querying why there is a dichotomy.

Line Entry..............................2008/2010 Change
Revenues...................................48.6%
COG.........................................33%
Inventories.................................36%
Receivables................................44%

What is evident is that COG is not tracking Revenues, and they should, there is a major discrepency. On this analysis it is obvious that the COG lags Revenues, thus the company likely hasn't transferred the entire cost of product from Inventory. Notice how Inventory change tends to track COG and Receivables track Revenue more closely than COG tracks Revenues. This again flags that further questions need to be asked as it raises questions of manipulation. COG should track Revenues closely.

Year..........................2008/2009......................2009/2010
Revenues.....................+83%..............................+17%
Cost of Goods...............+67%..............................+19%
Receivables..................+67%.............................+24%
Inventories...................+115%...........................[-13%]

When we return to the broken down data we see that in 2008/2009 when sales were booming, as CST became profitable, we still had this failure to transfer costs of Inventory correctly. In 2009/2010 where sales have slowed, we see that the fall in Revenues in % terms is greater than the fall in COG. This represents pricing pressure. Pricing pressure has compressed margins even though on a vertical analysis they both show Gross Margins of 66%

The pricing pressure that is resulting in margin compression can be partly explained in the following manner.

An analysis of Receivables.

2008...........................172
2009...........................192
2010...........................200

Receivables Period........+5.2%

Inventory analysis

2008.......................16.5
2009.......................19.4
2010.......................14.4

Inventory Turn............[-4.4%]

An analysis of Accts. Pay.

2008........................78.2
2009........................52.7
2010........................54.9

Accts Pay Turn...........[-11.1%]

Inventory is turning over more slowly, thus inventory is held longer, necessitating financing. Accts Pay are being demanded faster, again a financing issue, and Receivables are being collected more slowly, another financing issue. Thus the costs of financing are impacting the figures in the initial data and indicate a margin compression that is not immediately obvious to an analysis that considers only a vertical analysis.
		
Click to expand...



jog on
duc_


----------



## So_Cynical

Boggo said:


> The charts will tell you very quickly whether they are fundamentally sound or not.




Ok so when the BNB share price was was going up in 2005/6 it was fundamentally sound?....and at what point in the price collapse did it become unsound?

Rising share price = fundamentally sound / good

Falling share price = fundamentally unsound / bad

Its just way too simplistic and just totally ignores the variables.


----------



## Boggo

So_Cynical said:


> Ok so when the BNB share price was was going up in 2005/6 it was fundamentally sound?....and at what point in the price collapse did it become unsound?




No idea, don't care, if its going up I buy, if it turns down I sell and move on.




> Rising share price = fundamentally sound / good




In most cases yes, or maybe or the board spends more time on PR than on running the business, or, as in the case of TLS they tell the current holders how good the dividend yield is and that it will stay the same, they assume (correctly in most cases) that no one understands the formula for calculating yield.
They also just forgot to mention the bit about borrowing to maintain the dividend !
Either way it makes no difference, going up = I may be interested, going down = let me know when it starts going back up.




> Falling share price = fundamentally unsound / bad




No idea, if I am holding it my stop takes care of if it starts to turn down.
Why would I want to know about the director's pay increase if I too can't make some money from it otherwise I am just holding it for them to profit while I lose.




> Its just way too simplistic and just totally ignores the variables.




That's just it, its simple once you develop an entry exit procedure.
I am up over 140% on my best performing stock and I couldn't really tell you where they are based, who the people behind it are or what is in their annual report. All I know is that they are in the S&P ASX300 and they are going up.

What are the variables you mention ?


I am not trying to be a smart **** So_Cynical, just trying to point out that if you want to make money out of the market there is another (and simpler and better I believe) way of doing it without getting attached to half a dozen stocks.

That's just my


----------



## robusta

skc said:


> While I don't necessarily agree with averaging down, I have to say that the rule to average down is to average down only on fundamentally sound companies...
> 
> Given that both companies went belly up, whoever thought they were fundamentally sound were dead wrong. And whoever averaged down on them were either ignorant of the rule of averaging down, or got their analysis wrong.
> 
> Noting incorrect fundamental analysis doesn't equate to fundamental analysis does or doesn't work.
> 
> There is no doubt however that the inclusion of stop loss is good risk management for those who have inadequate fundamental analysis skills. It will generate a lot of false negatives, but save you from some disasters at the same time.




Could not agree more, if a company does not tick all the boxes (little or no debt, strong cash flow, high ROE, competitive advantage...) It should not even be in my portfolio let alone trying to average downon it.



Tysonboss1 said:


> Neither of those to stocks would have passed a true value investors tests.
> 
> Value investing is not about buying stock just because it's price has fallen. Their is some common misconceptions here about value investors, These misconceptions are made worse by people who call them selves value investors or fundamnetal investors who are not investors at all. a better description of them would be recovery speculaters or sector gamblers.
> 
> a person who says either of the following things is not a value investor or fundamental investor.
> 
> 1, "Stock in XYZ company has had a big fall so now it is cheap compared to it's highs, so I am going to load up because I am a value investor."
> 
> or,
> 
> 2, "I have a hunch the coal price will go up in coming years, so I will buy coal stocks because I am a fundamental investor"




Once again Tysonboss you have hit the nail on the head. 
You need to seperate value and price. 
If a stock for example is worth $1.00 it does not make it good value when the price falls from $3.00 to $2.00. It is so simple! The majority of the time when the sp is falling there is a very good reason for it. I just want to be able to take advantage on the rare occasion it is a opportunity to pick up a great company at a bargain price.



Boggo said:


> Precisely, some of the stocks mentioned by so called fundamental or value investors are just stocks that have been good or are popular and everyone knows them.
> I haven't seen any mention of any of the top fundamentally sound stocks at the moment such as SUL and MND.
> Technical analysts would be more familiar with them and are probably making good money from them while others debate the pros and cons of TLS or CSL
> 
> The charts will tell you very quickly whether they are fundamentally sound or not.
> 
> Rant over




Not sure how you worked out the fundamentals from a chart but I agree with you regarding MND. I have eight companies in my portfolio and MND is my third largest holding. Looks like we have reached the same conclusion from two different viewpoints.
SUL is basically fundamentally sound but a bit too much debt and declining ROE rules this one out for me.

Now back to averaging down.

My basic thought is if I allready own the best companies I can find and for some reason (usually macro-economic) the sp declines. 

Why would I go and buy the eighth or ninth best company I can find? 

Why not load up on the best company I own and pick up even more shares at a bargain price?


----------



## So_Cynical

robusta said:


> It would also be interesting to get any input from any other points of view to see any correlation between different investment techniques. Or if anyone wants to put up a alternative portfolio?
> 
> CBA       $50.50
> CSL       $32.50
> JBH       $19.59
> MCE      $4.95
> FGE       $4.05
> FRI        $1.40
> 
> Portfolio total $112.99       ASX 200 4694.90   20/10/2010







So_Cynical said:


> Ok here is my 6 at today's close (i own stocks with *)
> 
> 
> BPT   0.615*
> CPU   9.71*
> TSI   0.665*
> PTM   4.75*
> CIF   1.15
> APN   1.95
> 
> Portfolio total $18.84 were gona include dividends in this?




21 days into the challenge and im out in front  no need for commentary as the % gain tells all, so ill just post up the pic of our portfolios...1000 shares in each stock starting from the close 20/10/2010...dividend/distributions to be included as we go....hope its ok with Joe that we side track this thread. 
~


----------



## ParleVouFrancois

Cyn to be honest I'm quite impressed with your style of investing, buying in on dips then selling out and free carrying. I'm wondering how much of the free carries do you still hold in your portfolio? E.g. few thousand shares in small companies (like cash converters for example). Doesn't it get a bit crowded with say 50 shares or so in your portfolio? (built up over time I'd assume with the free carries). Might just be me but I can't really focus on more than 15-20 stocks max at any one time (being 100% up to date and being able to quote figures/projects off the top of my head).


----------



## Julia

So_Cynical said:


> 21 days into the challenge and im out in front  no need for commentary as the % gain tells all, so ill just post up the pic of our portfolios...1000 shares in each stock starting from the close 20/10/2010...dividend/distributions to be included as we go....hope its ok with Joe that we side track this thread.
> ~



Wouldn't it be more meaningful to quote your buys in terms of capital invested, given widely varying share prices?
So , instead of quoting a buy of 1000 shares in XYZ, you quote $10,000 invested in XYZ.

What I'd be interested to see, say at the end of 12 months, is if you have e.g. $100,000 invested, the % return on that capital.  It would just offer a clearer picture of what actually matters.

On a 12 months basis, you'd obviously include dividends and franking credits so as to provide a proper summary of what you've earned on your initial investment.

The small gains and losses, month to month, sometimes don't mean much over a longer period, especially given the present volatile market.


----------



## So_Cynical

ParleVouFrancois said:


> Cyn to be honest I'm quite impressed with your style of investing, buying in on dips then selling out and free carrying. I'm wondering how much of the free carries do you still hold in your portfolio? E.g. few thousand shares in small companies (like cash converters for example). Doesn't it get a bit crowded with say 50 shares or so in your portfolio? (built up over time I'd assume with the free carries). Might just be me but I can't really focus on more than 15-20 stocks max at any one time (being 100% up to date and being able to quote figures/projects off the top of my head).




24 months ago i had maybe 9 stocks in my portfolio and total unrealised losses of approximately 70%  in the depths of despair and coincidently the bottom of the GFC for the Miners, i decided to just totally commit to averaging down and put every last cent i had into my held stocks, mostly gold producers.

Long story short, i also decided i needed a trading plan and i needed to execute that plan with a measure of discipline...today i find myself with 20 stocks that include 5 of those 9 stocks i held way back when and 15 new stocks that ive added over the 24 months since my bottom.

About 6 months ago i decided to restrict my portfolio to about 18 stocks and just concentrate on re-entering those stocks when given the opportunity at significant SP dips...over the last few months ive come to the conclusion that i was changing a winning plan and i should just stick with whats working for me.

So i recently rediscovered my buying aggression and have now adopted a open ended strategy for my portfolio size that matches my investment time frame...have also gone back to my 10% strategy as letting most of my "open trade" winners run just wasn't working, however i have kept my increased position sizing.

Over the last 12 months ive sold out of 2 stocks that i had established free carry in and that were in substantial profit VRL & MDL and sold 1 big loser CTO and had 1 stock fall over on me for a 91% loss ( i did get 2 dividends )

My current portfolio is below with blue stars indicating 'open positions' with no free carry established, red stars indicate stocks with around 40% free carry / typically 1 trade, pink stars indicate at-least 2 trades and around 60 > 70% free carry, greens stars indicate over 80% free carry and at-least 2 trades, all dates are first entry.....with a bit of luck i would expect to exit (establish free carry) HHL and CTN next week,
~


----------



## So_Cynical

Julia said:


> Wouldn't it be more meaningful to quote your buys in terms of capital invested, given widely varying share prices?
> So , instead of quoting a buy of 1000 shares in XYZ, you quote $10,000 invested in XYZ.




I started doing that, like with 10K in each stock and it just looked a little all over the place, so it struck me that 1000 shares in each and the % gain was just neater and easier, and it really is all about the % gain anyway.



Julia said:


> The small gains and losses, month to month, sometimes don't mean much over a longer period, especially given the present volatile market.




Of course it could easily turn 100% around in another 3 weeks time...i just thought it was an opportune time to put up the first comparison as ive only just tonight made up the watchlists/portfolios...want to put up 6 picks Julia and see how you go?


----------



## Julia

So_Cynical said:


> I started doing that, like with 10K in each stock and it just looked a little all over the place, so it struck me that 1000 shares in each and the % gain was just neater and easier, and it really is all about the % gain anyway.



Yes, but to show the % gain on your basic capital invested is more easily understood than fiddling about with percentages on small investments.



> Of course it could easily turn 100% around in another 3 weeks time...i just thought it was an opportune time to put up the first comparison as ive only just tonight made up the watchlists/portfolios



OK, obviously it's up to you to do whatever you want.  I just made a suggestion as to what I thought would be more interesting.



> ...want to put up 6 picks Julia and see how you go?



Hell, no.  I'm quite out of touch on individual stocks.  I'm still standing aside.
This is a very comfortable position, but I'm conscious that I'm in fact missing out on some decent gains on the right stocks recently.

Have been considering posting up something along these lines in the "Passive Income" thread.   I'm really surprised to find how quickly my interest in trading/investing has fallen away in the face of that oh so easy interest each month which eliminates any any thought of 'what will the market do today?'

Staying in cash isn't really a good long term option, but it's surprisingly addictive as long as rates stay up.


----------



## Muschu

SC
If I may ask:
Where did you go, if anywhere, for advice in determining your strategy?  Was it a "do it myself and fly solo" approach or  did you base your approach on particular books you had read / newsletters you subscribed to / investment strategies you had studied / broker recommendations / an analyst or two / astrological signs  / or whatever?
I apologise if you have already given an answer along these lines but it's a long thread to go back through...
Regards
Rick


----------



## So_Cynical

Muschu said:


> SC
> If I may ask:
> Where did you go, if anywhere, for advice in determining your strategy?  Was it a "do it myself and fly solo" approach or  did you base your approach on particular books you had read / newsletters you subscribed to / investment strategies you had studied / broker recommendations / an analyst or two / astrological signs  / or whatever?
> I apologise if you have already given an answer along these lines but it's a long thread to go back through...
> Regards
> Rick




Rick im afraid ive had a bit of a ramble. i need a editor!

I've always tended to do things on my own terms and have always been a DIY kind of person, my strategy has developed over time and im still tweaking it and re examining it...you probably wont like this but at the core of my strategy is my experience and understanding of gambling, both horses and casino.

When i a teen growing up in the mid 70's mum and dad and there friends would have a punt on the horses and a few beers etc while listening to the Saturday races on the radio...mum would do a tab run maybe twice during the afternoon and put $1 on my 1 selection, i took an interest in it and became a studyer of 'form' and over time started to get a few winners.

Anyway a few years later and im working a crappy factory job for about $60 a week and im still punting 3 and $5 bets on the ponys on a Sat arvo and doing ok with conservative place bets and getting a 30% to 60% return every weekend with my 2 to 4 (safe) bets...one weekend i had 3 $5 place bets and won all 3 giving me a return of about 100% (doubled my money) and the thought somehow occurred to me "what if i had bet $50 in stead of $5" could i make $150 (double my money) simply doing exactly what i would do anyway except increase my bets by a factor of 10?

After much though...the next weekend i did just that except i limited myself to just 1 bet, i did everything as i normally would...followed a rigorous course of elimination to decide the best 3 or 4 bets for the afternoon and then simply cut them until i was left with just 1 horse, 1 bet (and ill never forget) it was a TJ Smith horse from Sydney called Saxonia, having its first run in Melbourne going around the wrong way and down the straight 6 at Flemington...it came second and paid $1.05, i had made a weeks pay in less than 80 seconds.

What followed was a rather intense 5 or 6 months where i regularly made between $100 to $400 a week with place bets on very very carefully selected horses...its was very exiting and very stressful, a real roller coaster ride, one nite a the Gloucester park trots i made $900 on the first 2 races, with 2 winners (i had progressed to $50 each way bets) in a row and left...i was shaking i was that excited. anyway it all ended soon after on a day i call 'Black Saturday' my nerves were shot and i could never recapture that consistency again...i could never punt with big money again as my risk aversion dominated my thinking and thus decisions....so long story short, my stock selection now is very much modelled on my horse selection then.  

Except its all so much easier now with all the info that's available, back in the 70's i would buy the evening paper in Perth on a Thursday because it had the track work times for Melb and Sydney horses...I use the watchlists on the ASX site because that's where the bulk of the info i need is, i spend alot of time going back over announcements when im researching...and when i started in the market, the ASX site was great for finding stocks that were in businesses that interested me.

If you think Zinc is under valued type Zinc into the search box and in the first 5 pages of results are all the Zinc stocks you need to know about, works for anything, cattle, sugar, prostitution...whatever, then i would add them to a watch-list and watch...after a while it became obvious that all stock weren't equal and there were other factors....I've learnt alot from the many clued in posters on this forum..i cant remember who it was that had "plan your trade, trade your plan" in there signature, but i know it sparked my interest so i investigated its meaning and thus started to discover that discipline was a very necessary aspect of successful trading.  

The first Trendy i found was Nizar..he had a blog where he very generously posted all his trades and i found myself struggling to understand why anyone would want to buy stocks that to me "felt" like they were topping out, when in trend follower speak they were breaking out....still he was in profit overall because his losers were cut at i think around 5% and his winners let to run and it was a bull market then.

So at the bottom of the market for the miners i developed a plan and i planed my trades with the goal of establishing free carry in stocks that i wanted to hold long term...selecting stocks that i really wanted to own because i like there business and or assets but understand that that my edge is to buy when the SP is falling, when the faint hearted etc are running for the exit.

I feel im like a kind of reverse trend follower, except that unlike a trendy im actually buying the stock and not the trend, a falling share price excites me because i can see an opportunity to enter at a significant discount, and when the falling SP belongs to a stock i see potential in...well that's when the stock gets short listed and becomes a possible portfolio stock....I've never been to a investment seminar, or even read a free trial of a news letter, i don't have access to broker recommendations or a mate in the industry, i don't have a full service broker and i have no education or training in finance/investing...ive only read 1 book on the subject and found it a little silly and one dimensional (it was a kind of trend following book) and i think astrology is a crock. 

I pick stocks i want to own and buy them at a price i want to pay, establish free carry and re-enter if the opportunity arises or just buy the next on the list if there's no opportunity to re-enter a portfolio stock...ive been in the market since mid 2007 and pick 2.7 winners (approx) for every loser, since i don't cut my losers early they tend to be big and so far i cant find a disciplined way to mitigate that other than to simply make better selections in the first place.

For sure my longest post here ever...phew!


----------



## robusta

So_Cynical said:


> 21 days into the challenge and im out in front  no need for commentary as the % gain tells all, so ill just post up the pic of our portfolios...1000 shares in each stock starting from the close 20/10/2010...dividend/distributions to be included as we go....hope its ok with Joe that we side track this thread.
> ~




Well done!!! You are certainly light years ahead at the moment.

The only thing I would like to change is a minor accounting issue. 1000 shares of each weights the portfolio heavily towards the more expensive shares. Thankyou for posting the results they certainly make interesting reading.



So_Cynical said:


> I've always tended to do things on my own terms and have always been a DIY kind of person, my strategy has developed over time and im still tweaking it and re examining it...you probably wont like this but at the core of my strategy is my experience and understanding of gambling, both horses and casino.
> 
> When i a teen growing up in the mid 70's mum and dad and there friends would have a punt on the horses and a few beers etc while listening to the Saturday races on the radio...mum would do a tab run maybe twice during the afternoon and put $1 on my 1 selection, i took an interest in it and became a studyer of 'form' and over time started to get a few winners.
> 
> Anyway a few years later and im working a crappy factory job for about $60 a week and im still punting 3 and $5 bets on the ponys on a Sat arvo and doing ok with conservative place bets and getting a 30% to 60% return every weekend with my 2 to 4 (safe) bets...one weekend i had 3 $5 place bets and won all 3 giving me a return of about 100% (doubled my money) and the thought somehow occurred to me "what if i had bet $50 in stead of $5" could i make $150 (double my money) simply doing exactly what i would do anyway except increase my bets by a factor of 10?
> 
> After much though...the next weekend i did just that except i limited myself to just 1 bet, i did everything as i normally would...followed a rigorous course of elimination to decide the best 3 or 4 bets for the afternoon and then simply cut them until i was left with just 1 horse, 1 bet (and ill never forget) it was a TJ Smith horse from Sydney called Saxonia, having its first run in Melbourne going around the wrong way and down the straight 6 at Flemington...it came second and paid $1.05, i had made a weeks pay in less than 80 seconds.
> 
> What followed was a rather intense 5 or 6 months where i regularly made between $100 to $400 a week with place bets on very very carefully selected horses...its was very exiting and very stressful, a real roller coaster ride, one nite a the Gloucester park trots i made $900 on the first 2 races, with 2 winners (i had progressed to $50 each way bets) in a row and left...i was shaking i was that excited. anyway it all ended soon after on a day i call 'Black Saturday' my nerves were shot and i could never recapture that consistency again...i could never punt with big money again as my risk aversion dominated my thinking and thus decisions....so long story short, my stock selection now is very much modelled on my horse selection then.   ~




Love it you taught yourself risk management. I also have a bit of history on the punt but made a terrible gambler. Compounding my losses and basically loosing my shirt every week I admire your discipline.



So_Cynical said:


> Except its all so much easier now with all the info that's available, back in the 70's i would buy the evening paper in Perth on a Thursday because it had the track work times for Melb and Sydney horses...I use the watchlists on the ASX site because that's where the bulk of the info i need is, i spend alot of time going back over announcements when im researching...and when i started in the market, the ASX site was great for finding stocks that were in businesses that interested me.
> 
> If you think Zinc is under valued type Zinc into the search box and in the first 5 pages of results are all the Zinc stocks you need to know about, works for anything, cattle, sugar, prostitution...whatever, then i would add them to a watch-list and watch...after a while it became obvious that all stock weren't equal and there were other factors....I've learnt alot from the many clued in posters on this forum..i cant remember who it was that had "plan your trade, trade your plan" in there signature, but i know it sparked my interest so i investigated its meaning and thus started to discover that discipline was a very necessary aspect of successful trading.
> 
> The first Trendy i found was Nizar..he had a blog where he very generously posted all his trades and i found myself struggling to understand why anyone would want to buy stocks that to me "felt" like they were topping out, when in trend follower speak they were breaking out....still he was in profit overall because his losers were cut at i think around 5% and his winners let to run and it was a bull market then.
> 
> So at the bottom of the market for the miners i developed a plan and i planed my trades with the goal of establishing free carry in stocks that i wanted to hold long term...selecting stocks that i really wanted to own because i like there business and or assets but understand that that my edge is to buy when the SP is falling, when the faint hearted etc are running for the exit.~




Looks like we are on the same page here, we both love a falling market or sp as it can present great opportunities.
The free carry concept interest's me. Do you have a set % or $ gain you are looking for when you go into a trade?



So_Cynical said:


> I feel im like a kind of reverse trend follower, except that unlike a trendy im actually buying the stock and not the trend, a falling share price excites me because i can see an opportunity to enter at a significant discount, and when the falling SP belongs to a stock i see potential in...well that's when the stock gets short listed and becomes a possible portfolio stock....I've never been to a investment seminar, or even read a free trial of a news letter, i don't have access to broker recommendations or a mate in the industry, i don't have a full service broker and i have no education or training in finance/investing...ive only read 1 book on the subject and found it a little silly and one dimensional (it was a kind of trend following book) and i think astrology is a crock.
> 
> I pick stocks i want to own and buy them at a price i want to pay, establish free carry and re-enter if the opportunity arises or just buy the next on the list if there's no opportunity to re-enter a portfolio stock...ive been in the market since mid 2007 and pick 2.7 winners (approx) for every loser, since i don't cut my losers early they tend to be big and so far i cant find a disciplined way to mitigate that other than to simply make better selections in the first place.




Wow very impressive. So would I be right in saying you use charts to identify opportunities but after that use fundamental analysis to identify the best opportunities?


----------



## prawn_86

Is is a very good thread. Thanks for the input s_c, i'm certainly watching with interest and have to admit that i have been watching your results etc over the last 6 months or so


----------



## So_Cynical

> Quote Originally Posted by robusta
> It would also be interesting to get any input from any other points of view to see any correlation between different investment techniques. Or if anyone wants to put up a alternative portfolio?
> 
> CBA $50.50
> CSL $32.50
> JBH $19.59
> MCE $4.95
> FGE $4.05
> FRI $1.40
> 
> Portfolio total $112.99 ASX 200 4694.90 20/10/2010






> Quote Originally Posted by So_Cynical
> Ok here is my 6 at today's close (i own stocks with *)
> 
> BPT 0.615*
> CPU 9.71*
> TSI 0.665*
> PTM 4.75*
> CIF 1.15
> APN 1.95
> 
> 
> Portfolio total $18.84 were gona include dividends in this?






So_Cynical said:


> 21 days into the challenge and im out in front  no need for commentary as the % gain tells all, so ill just post up the pic of our portfolios...1000 shares in each stock starting from the close 20/10/2010...dividend/distributions to be included as we go....hope its ok with Joe that we side track this thread.
> ~




Time for an end of financial year update on how the robusta (value) portfolio is travelling against the So_Cynical (low cost average) portfolio...surprisingly there hasn't been any overall outstanding results, sure some excellent results from some individual stocks but on a portfolio V portfolio basis...its a little disappointing.

Must say that about 5 or 6 months ago robusta was well up...around 20% i think, until FRI fell of a cliff and the JBH dividend thingy.


robusta portfolio up 2.63%
So_Cynical portfolio down 9.50%

Conclusion. :dunno:
~


----------



## LifeChoices

I'm finding it interesting comparing your investments/gambles with Tyler Durden's idea of putting the money in the bank for 6.51% interest. 

You don't need to be a mathematician to work out who would be doing better.


----------



## sammy84

LifeChoices said:


> I'm finding it interesting comparing your investments/gambles with Tyler Durden's idea of putting the money in the bank for 6.51% interest.
> 
> You don't need to be a mathematician to work out who would be doing better.




A mentality like that will restrict you to earning 6.51% throughout your life. It has been a hard year for trading, no one could argue otherwise. But you need to make yourself available to the next good trend, and when it pays off should cover the bank interest a few times over. Need to long term view, even if you trade shorter time frames.


----------



## LifeChoices

^^^ Maybe you need a five year view ^^^

Let's compare the all ordinaries index from July 2006 to July 2011 it has gone down almost 9%

Now you don't have to belong to MENSA to figure that investing money in the bank over the last 5 years would have been a better option. 

Yes it's been a tough 5 years and I think it's going to get worse before it gets better.


----------



## So_Cynical

LifeChoices said:


> I'm finding it interesting comparing your investments/gambles with Tyler Durden's idea of putting the money in the bank for 6.51% interest.
> 
> You don't need to be a mathematician to work out who would be doing better.




I failed maths at school so im certainly no mathematician....however im near certain my little portfolio will be up over 10% in profit within 6 months....at least 10% 



LifeChoices said:


> ^^^ Maybe you need a five year view ^^^
> 
> *Let's compare the all ordinaries index from July 2006 to July 2011 it has gone down almost 9%*
> 
> Now you don't have to belong to MENSA to figure that investing money in the bank over the last 5 years would have been a better option.
> 
> Yes it's been a tough 5 years and I think it's going to get worse before it gets better.




Depends on what you brought and the time frame...i brought 2 parcels of ILU in mid/late 09 for around $3 a share and sold a few months ago at $12 a share....i brought TRY in mid 2007 at $2.45 and sold 11 months ago for $3.43.

The index shows you the broad story....the detail is so much more interesting.


----------



## VSntchr

and just to add, most people taking a long term view would say 10 years rather than 5. Once you do this, the ASX is in positive territory despite the horrible last 4 years.

No indication of the future, but it does show the long term view you were referring to!


----------



## Tysonboss1

LifeChoices said:


> ^^^ Maybe you need a five year view ^^^
> 
> Let's compare the all ordinaries index from July 2006 to July 2011 it has gone down almost 9%
> 
> Now you don't have to belong to MENSA to figure that investing money in the bank over the last 5 years would have been a better option.
> 
> Yes it's been a tough 5 years and I think it's going to get worse before it gets better.




Ok, a couple of flaws,

1, your simplistic example includes a once in 30 year event during a 5 year example, which obviously distorts the results, 

However the all ords would still win for the following reasons.

1, You failed to include dividends paid on the all ords.

2, Dividends are taxed much more favourably than interest

3, most people invest steadily over time so falls work in their favor, If you started putting $500 a month into the all ords in 2006 and contiuned doing so right through the GFC until now your capital gain and dividend income would far out way the interest in a bank account.

4, the capital gain is taxed much more favourably than any other income, because first you are allowed to let it compound for years before the tax event happens and then you get a 50% discount, you can also further inhance this by timing the event to happen in a year where your other income is low.


----------



## sammy84

LifeChoices said:


> ^^^ Maybe you need a five year view ^^^
> 
> Let's compare the all ordinaries index from July 2006 to July 2011 it has gone down almost 9%
> 
> Now you don't have to belong to MENSA to figure that investing money in the bank over the last 5 years would have been a better option.
> 
> Yes it's been a tough 5 years and I think it's going to get worse before it gets better.




As other posters have pointed out, you have really missed the point. If we are comparing throwing money in the stock market vs active investment, then yes, you mind numbing statement is correct. But we're not. Obviously you must have an entry and an EXIT. It is this that will deliver you your gains. Take the March 09 rally for example, if you were to have invested then and subsequently protected some of your profits once the market started to stagnate, your bank interest would look like chump change.


----------



## LifeChoices

sammy84 said:


> Take the March 09 rally for example, if you were to have invested then and subsequently protected some of your profits once the market started to stagnate, your bank interest would look like chump change.




Take the 2008 free fall for example, if you were to have invested in January you would have had very little capital left by April 2009. 

Anyone can pick times, dips and peaks, and winning stocks with hindsight. If there is one thing about all the 'experts' on ASF they all have such wonderful hindsight.

When predicting the future - everyone is stumped. You just have to look past the June stock tipping competition to work that out.

Let's revisit this thread in 6 months time and see if sc is in fact up at least 10% and if the investment would be been better off earning 6.51% in the bank.


----------



## mazzatelli

LifeChoices said:


> Take the 2008 free fall for example, if you were to have invested in January you would have had very little capital left by April 2009.
> 
> Anyone can pick times, dips and peaks, and winning stocks with hindsight. If there is one thing about all the 'experts' on ASF they all have such wonderful hindsight.
> 
> When predicting the future - everyone is stumped. You just have to look past the June stock tipping competition to work that out.
> 
> Let's revisit this thread in 6 months time and see if sc is in fact up at least 10% and if the investment would be been better off earning 6.51% in the bank.




We should all just hit silver and data scrape from Commsec FTW!!!


----------



## Tysonboss1

LifeChoices said:


> Take the 2008 free fall for example, if you were to have invested in January you would have had very little capital left by April 2009.
> 
> Anyone can pick times, dips and peaks, and winning stocks with hindsight. If there is one thing about all the 'experts' on ASF they all have such wonderful hindsight.
> 
> When predicting the future - everyone is stumped. You just have to look past the June stock tipping competition to work that out.
> 
> Let's revisit this thread in 6 months time and see if sc is in fact up at least 10% and if the investment would be been better off earning 6.51% in the bank.


----------



## sammy84

LifeChoices said:


> Take the 2008 free fall for example, if you were to have invested in January you would have had very little capital left by April 2009.
> 
> Anyone can pick times, dips and peaks, and winning stocks with hindsight. If there is one thing about all the 'experts' on ASF they all have such wonderful hindsight.
> 
> When predicting the future - everyone is stumped. You just have to look past the June stock tipping competition to work that out.
> 
> Let's revisit this thread in 6 months time and see if sc is in fact up at least 10% and if the investment would be been better off earning 6.51% in the bank.




That's why I referred to active investing. Not picking tops and bottoms. That is what we all aim to achieve but not as easy.  The other reasons outlined by other members are also very relevant. If it is not hitting home to you then it is probably safer for you keep your money in term deposits rather that shares.  

Ok no more biting from me on this thread. You are right. I am wrong. For your sake I hope inflation picks up, that way the RBA may increase interest rates and you could be earning close to 10%. You’ll be rich in, um, 30 years*

*$100k compounded at 8% PA compounded for 30 yrs equals $1m. Let’s ignore the effects of inflation.


----------



## robusta

Julia said:


> Wouldn't it be more meaningful to quote your buys in terms of capital invested, given widely varying share prices?
> So , instead of quoting a buy of 1000 shares in XYZ, you quote $10,000 invested in XYZ.
> 
> What I'd be interested to see, say at the end of 12 months, is if you have e.g. $100,000 invested, the % return on that capital.  It would just offer a clearer picture of what actually matters.
> 
> On a 12 months basis, you'd obviously include dividends and franking credits so as to provide a proper summary of what you've earned on your initial investment.
> 
> The small gains and losses, month to month, sometimes don't mean much over a longer period, especially given the present volatile market.




Julia has a excellent point here.



robusta said:


> If I assume a equally weighted portfolio and track it against the ASX 200 it should be interesting to see the results over the medium to long term.
> 
> It would also be interesting to get any input from any other points of view to see any correlation between different investment techniques. Or if anyone wants to put up a alternative portfolio?
> 
> CBA       $50.50
> CSL       $32.50
> JBH       $19.59
> MCE      $4.95
> FGE       $4.05
> FRI        $1.40
> 
> ASX 200 4694.90   20/10/2010




Robusta's starting portfolio.

198 x CBA @ $50.50  = $9999.00
307 x CSL @ $32.50  = $9977.50
510 x JBH @ $19.59  = $9990.90
2020xMCE @ $4.95   = $9999.00
2469xFGE  @ $4.05   = $9999.45
7142xFRI   @$1.40   = $9998.80

= $59,964.65 invested , $35.35 cash



So_Cynical said:


> Ok here is my 6 at today's close (i own stocks with *)
> 
> 
> BPT   0.615*
> CPU   9.71*
> TSI   0.665*
> PTM   4.75*
> CIF   1.15
> APN   1.95




So_Cynical's starting portfolio

16260 x BPT @ $0.615 = $9999.90
1029  x CPU @ $9.71   = $9991.59
15037 x TSI  @ $0.665 = $9998.27
2105  x PTM @ $4.75   =$9998.75
8695  x CIF  @ $1.15  = $9999.25
5128  x APN @ $1.95  = $9999.60

= $59.987.36 invested , $12.64 cash


----------



## robusta

robusta said:


> Robusta's starting portfolio.
> 
> 198 x CBA @ $50.50  = $9999.00
> 307 x CSL @ $32.50  = $9977.50
> 510 x JBH @ $19.59  = $9990.90
> 2020xMCE @ $4.95   = $9999.00
> 2469xFGE  @ $4.05   = $9999.45
> 7142xFRI   @$1.40   = $9998.80
> 
> = $59,964.65 invested , $35.35 cash
> 
> 
> 
> So_Cynical's starting portfolio
> 
> 16260 x BPT @ $0.615 = $9999.90
> 1029  x CPU @ $9.71   = $9991.59
> 15037 x TSI  @ $0.665 = $9998.27
> 2105  x PTM @ $4.75   =$9998.75
> 8695  x CIF  @ $1.15  = $9999.25
> 5128  x APN @ $1.95  = $9999.60
> 
> = $59.987.36 invested , $12.64 cash




Our portfolio's today would be:

Robusta

198 x CBA @ $51.78  = $10252.44            $261.36 div
307 x CSL @ $32.50  = $9977.50              $107.45 div
510 x JBH @ $16.41  = $8369.10              $244.80 div
2020xMCE @ $7.91   = $15978.20             $60.60  div
2469xFGE  @ $5.80   = $14320.20             $98.76  div
7142xFRI   @$1.00   = $7142.00               $214.26 div

= $59,964.65 invested ,                            $35.35 cash

Total $66,039.44 + $987.23 cash = total portfolio  $67,026.67

So_Cynical

16260 x BPT @ $0.90 = $14,634.00            $121.95 div
1029  x CPU @ $8.64   = $8890.56             $144.06 div
15037 x TSI  @ $0.845 = $12706.26           $390.96 div
2105  x PTM @ $4.12   =$8672.60             $210.50 div
8695  x CIF  @ $1.01  = $8781.95             $608.65 div
5128  x APN @ $1.295  = $6636.87            $358.96 div

= $59.987.36 invested , $12.64 cash
Total $60, 324.24 = + $1,847.73 cash = total portfolio of $62,171.97

Not a bad return from either of us from $60,000 in 8 months when the ASX 200 has gone from 4694.9 on 20/10/2010 to 4598.10 (-2.1%) .


----------



## nulla nulla

In the current prevailing market environment, why would you lock yourself into a stock for long term (Unless of course you bought it in 2003 and it owes you nothing)?

Buying and holding in a sideways bear market would be worse than parking your capital in fixed interest, surely?


----------



## robusta

nulla nulla said:


> In the current prevailing market environment, why would you lock yourself into a stock for long term (Unless of course you bought it in 2003 and it owes you nothing)?
> 
> Buying and holding in a sideways bear market would be worse than parking your capital in fixed interest, surely?




11.71% up in 8 months from buy and hold?. Buy and hold is dead. long live buy and hold.

In my actual portfolio MCE and FGE are the only two I still hold, they were my largest holdings back then and are still my largest holdings (MCE 34.6%, FGE 28.10%). The rest have been replaced with businesses I also intend to hold indefinately.


----------



## So_Cynical

What a difference equal weightings make. :dunno:

I have roughly 3K in dividends and distributions too (counting the divs just gone)...that should be over double what you (robusta) should have...and would even us up a little.

Nice to see we are at-least not bleeding capital.
~


----------



## So_Cynical

nulla nulla said:


> In the current prevailing market environment, why would you lock yourself into a stock for long term (Unless of course you bought it in 2003 and it owes you nothing)?
> 
> Buying and holding in a sideways bear market would be worse than parking your capital in fixed interest, surely?




Its working for me...low cost averaging into "buy and hold" ~ my dividends and distributions are equivalent to a yield on current portfolio value of about 5.4% (gross) and by increasing my buy and hold positions over time, by low cost averaging, my D&D yield grows annually...every time i exit a new trade i leave a few shares behind (profit) and so the $ yield grows.

Annually up over 200% from last FY, if i can even maintain half that figure going forward, in just 4 years i be making more from D&D than i do in my day job. 

^^^ not really possible...but its an interesting statistic.


----------



## KurwaJegoMac

So_Cynical, what software/platform are you using for the Portfolios you're posting (yours and Robusta's)? It's very simple and clean, I like it.

Thanks.


----------



## So_Cynical

KurwaJegoMac said:


> So_Cynical, what software/platform are you using for the Portfolios you're posting (yours and Robusta's)? It's very simple and clean, I like it.
> 
> Thanks.




https://www.smartportfolio.com.au/

Yep its simple, clean and well designed...has some nice charts and tax, P/L reports too.

problem is for me is that it cant do parcels and as i found out tonight cant do some dividends, as i was getting a calculation error and it didn't like excepting dividends that weren't pre loaded....but hey i paid nothing to join the site 2 years ago so cant really complain.

Its free to use for a trail period but now they want you to pay to keep using it....the people behind the site are active developers and are constantly working to upgrade the site...its improved heaps over the time ive been using it.


----------



## Tysonboss1

nulla nulla said:


> Buying and holding in a sideways bear market would be worse than parking your capital in fixed interest, surely?




Nope, the fixed intererest offers no hope of capital growth, and the interest is eroded by taxes with next to no tax benefits and inflation.

On the other hand it is possible to invest in assets that are producing dividends equal to or higher than bank interest, that are tax free with the franking credits and if there is inflation over time the asset prices should generally keep pace with it and produce a natural infaltion hedge.

They real question you have to ask is , "Are current asset prices at speculative levels, or do they reflect the earning power of the asset"

If the answer is that they are not part of a speculative bubble then they will perform better than cash, over time.


----------



## nulla nulla

Tysonboss1 said:


> Nope, the fixed intererest offers no hope of capital growth, and the interest is eroded by taxes with next to no tax benefits and inflation.




An investment in fixed interest would achieve 6% before tax, an investment in your mortgage would equate to 7.5% (or there-abouts) tax free.



> On the other hand it is possible to invest in assets that are producing dividends equal to or higher than bank interest, that are tax free with the franking credits and if there is inflation over time the asset prices should generally keep pace with it and produce a natural infaltion hedge.




The number of shares producing dividends above 6% p.a before tax is minimal and the number producing dividends above 6% p.a, with franking credits is even less. The "current market environment" is sideways and down. The global economic crisis fallout with sovereign debt is bubbling to another explosion and collapse. The medium term forward projection is gloomy at best. The likelihood of capital gains on "long" investments keeping pace with cpi is dubious .



> They real question you have to ask is , "Are current asset prices at speculative levels, or do they reflect the earning power of the asset"
> 
> If the answer is that they are not part of a speculative bubble then they will perform better than cash, over time.




The answer to this (in my opinion) is "Yes, share prices are still at speculative levels mostly at inflated price/income levels and returning yields less than cumulative bank interest rates. The speculation that "long" investments will garner capital gains that combine with yield to out perform bank rates is not supported by recent economic figures.

In my opinion, So Cynical has it right when he combines swing trading with dividend stripping for short term gains of 3 - 6% per trade. Cumulative, over 12 months, will see his return on initial capital expand per trade and easily exceed 15% p.a. Holding some shares bought on a low entry price after the trade, for "free carry" , and topping these up while preserving his initial trading capital is a sensible hedge although it does reduce his trade capital and could reduce his posible returns.


----------



## Tysonboss1

nulla nulla said:


> An investment in fixed interest would achieve 6% before tax, an investment in your mortgage would equate to 7.5% (or there-abouts) tax free.
> 
> 
> 
> The number of shares producing dividends above 6% p.a before tax is minimal and the number producing dividends above 6% p.a, with franking credits is even less. The "current market environment" is sideways and down. The global economic crisis fallout with sovereign debt is bubbling to another explosion and collapse. The medium term forward projection is gloomy at best. The likelihood of capital gains on "long" investments keeping pace with cpi is dubious .
> 
> 
> 
> The answer to this (in my opinion) is "Yes, share prices are still at speculative levels mostly at inflated price/income levels and returning yields less than cumulative bank interest rates. The speculation that "long" investments will garner capital gains that combine with yield to out perform bank rates is not supported by recent economic figures.
> 
> In my opinion, So Cynical has it right when he combines swing trading with dividend stripping for short term gains of 3 - 6% per trade. Cumulative, over 12 months, will see his return on initial capital expand per trade and easily exceed 15% p.a. Holding some shares bought on a low entry price after the trade, for "free carry" , and topping these up while preserving his initial trading capital is a sensible hedge although it does reduce his trade capital and could reduce his posible returns.




I wasn't talking about large capital gains from economic growth, I was simply talking about capital gains related to inflation over time.

for example, if a company owns an asset that produces a product or service even if the number of units it produces and profit as a % of input costs per unit remain relatively the same the capital value of that asset will increase along with inflation,

Say westfeild owns a shopping centre and earns 6% net profit, each year the rent it charges will probably increase along with inflation, so each year their 6% rental return grows along with inflation and the capital value will grow with inflation to match the increased rent.

In comparison the bank interest will not grow each year with inflation and neither will the capital value of the deposit, so any inflation has to be taken from the income rather than having an asset that provides a natural hedge.

example,

Bank deposit - invested $100 earning 6.5% =  $6.5earnings  minus $1.95 tax and $3 inflation = $1.55 real earnings

share owning real assets - invested $100 earns 6% franked dividend = $6 minus $0.00 tax inflation hedged by real asset = $6 real earnings + chance of economic growth of the company


----------



## robusta

nulla nulla said:


> The number of shares producing dividends above 6% p.a before tax is minimal and the number producing dividends above 6% p.a, with franking credits is even less. The "current market environment" is sideways and down. The global economic crisis fallout with sovereign debt is bubbling to another explosion and collapse. The medium term forward projection is gloomy at best. The likelihood of capital gains on "long" investments keeping pace with cpi is dubious .




Not if you can find good quality companies that are cheap IMO.






nulla nulla said:


> The answer to this (in my opinion) is "Yes, share prices are still at speculative levels mostly at inflated price/income levels and returning yields less than cumulative bank interest rates. The speculation that "long" investments will garner capital gains that combine with yield to out perform bank rates is not supported by recent economic figures.




Depends on the "long" investments you are in, I am confident my portfolio will outperform bank rates in either capital gains or dividends in the longterm and furthermore by a large margin when capital gains are combined with dividend yield.

Take for example mt FGE holdings most people look at it as a growrh stock yielding only ~ 1.4% at current prices but when you look at my average purchace price @ $2.563 it is yielding me 3.51% on my investment and growing with a nice 128.2% potentual capital gain to come. It would not surprise me if the yield reached ~ 20% before I exit this company.

Why would I want to trade such a excellent company 

Buy and hold for me.


----------



## nulla nulla

robusta said:


> Not if you can find good quality companies that are cheap IMO.




For the record why not name them. We can come back to monitor their progress on a 6 monthly basis.



> Depends on the "long" investments you are in, I am confident my portfolio will outperform bank rates in either capital gains or dividends in the longterm and furthermore by a large margin when capital gains are combined with dividend yield.




Going on the list provided, we can come back to it on a regular basis to see whether your optimism is justified.



> Take for example mt FGE holdings most people look at it as a growrh stock yielding only ~ 1.4% at current prices but when you look at my average purchace price @ $2.563 it is yielding me 3.51% on my investment and growing with a nice 128.2% potentual capital gain to come. It would not surprise me if the yield reached ~ 20% before I exit this company.




3.51% is less than bank rates and "potential capital gain" is a bit like counting your chickens before the eggs have hatched.



> Why would I want to trade such a excellent company
> 
> Buy and hold for me.




Moving in and out on the highs and lows like So_Cynical would increase your stake in the company at no further capital outlay. IMO buying and holding, in this environment, limits your opportunity to maximise the return on your investment capital.


----------



## robusta

nulla nulla said:


> For the record why not name them. We can come back to monitor their progress on a 6 monthly basis.




Sorry I am getting a little bored with this argument if you are interested you could use the portfolio posted (MCE, FGE, CBA, CSL, FRI) or my actual current portfolio with apropriate weightings if you like:

Company          Cost         Weighting
MCE                 $4.518      34.31%
FGE                 $2.563       29.21%
ZGL                 $0.528       12.8%
VOC                $2.49         11.05%
CCV                $0.807        5.64%
TSM                $0.658       4.30%
PHK                 $0.073       2.69%





nulla nulla said:


> Going on the list provided, we can come back to it on a regular basis to see whether your optimism is justified.





You sure can if you like.





nulla nulla said:


> 3.51% is less than bank rates and "potential capital gain" is a bit like counting your chickens before the eggs have hatched..




True let us see how many chooks we end up with.





nulla nulla said:


> Moving in and out on the highs and lows like So_Cynical would increase your stake in the company at no further capital outlay. IMO buying and holding, in this environment, limits your opportunity to maximise the return on your investment capital.




True but I have no idea when the highs or lows are reached instead I will stick to buying when IMO companies are cheap and selling when they are overvalued.

Maybe it would be more interesting if you could show us how much better you do with trading?


----------



## Tysonboss1

nulla nulla said:


> 3.51% is less than bank rates and "potential capital gain" is a bit like counting your chickens before the eggs have hatched.
> 
> 
> l.




Not after tax and inflation. remember bank interest is only about 1% after inflation and tax.

it won't be steady, but as inflation devalues the currency, the price of real assets will increase, so a 3% cashflow from a real asset is naturally hedged against inflation and better than a higher unhedged yield, especially when you factor in franking and retained earning that are reinvested.

Thats the last I will say.


----------



## nulla nulla

robusta said:


> Sorry I am getting a little bored with this argument




Sorry, I'm not arguing, just voicing a difference of perspective.



> Maybe it would be more interesting if you could show us how much better you do with trading?




Naturaly anything I post would be unsubstantiated. Without divulging private and personal information, enabling figures to be corroberated, I could post anything (or be open to the suggestion I have).

I think Tysonboss is right. No point in arguing, I'll leave you to your prefered style of trading. Cheers.


----------



## So_Cynical

robusta said:


> Maybe it would be more interesting if you could show us how much better you do with trading?




I'm certain i can do much better trading...TSI has been taken over so do you mind if i put my TSI money (profits & Capital) into something else?


----------



## robusta

So_Cynical said:


> I'm certain i can do much better trading...TSI has been taken over so do you mind if i put my TSI money (profits & Capital) into something else?




No worries, also I am not sure if I worked out the dividends properly however we may as well re-invest them in whatever we want.


----------



## So_Cynical

robusta said:


> No worries, also I am not sure if I worked out the dividends properly however we may as well re-invest them in whatever we want.




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


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


----------



## LifeChoices

Just interested if either of your views (Robusta and So_Cynical) has changed on the next 6 months ahead, and who is now losing the least based on the last ASX close?


----------



## So_Cynical

LifeChoices said:


> Just interested if either of your views (Robusta and So_Cynical) has changed on the next 6 months ahead, and who is now losing the least based on the last ASX close?




Robusta's 6 stock challenge portfolio down 10.25% My portfolio down 12.46%

Personally i feel the market will go sideways for the next 18 months with potential to go up and down within a 1000 point range 4000 > 5000, this has been my opinion for the last 20 months....i cant see any reason to change that.

I'm a panic buyer!


----------



## robusta

So_Cynical said:


> Robusta's 6 stock challenge portfolio down 10.25% My portfolio down 12.46%
> 
> Personally i feel the market will go sideways for the next 18 months with potential to go up and down within a 1000 point range 4000 > 5000, this has been my opinion for the last 20 months....i cant see any reason to change that.
> 
> I'm a panic buyer!




I am with you So_Cynical now is the time to panic buy not sell.

I however have no idea what the market will do.


----------



## LifeChoices

I think I'm going to enjoy earning 6% interest in the bank account waiting to pounce on new lows as you post your losses for the next few months on this thread.

If things start to go really pear shaped and there is a sign of a run on the banks, I'll scrape out what I can from my account and head over to Dan Murphy's and buy as much Johnny Walker Red Whiskey (I've never been a big fan of bourbon) and Winfield Red as money can buy.

My mother told me that towards the end of WWII in Hamburg when Hitler starting printing money, alcohol and cigarettes were the only items that had any real value.


----------



## So_Cynical

LifeChoices said:


> I think I'm going to enjoy earning 6% interest in the bank account waiting to pounce on new lows as you post your losses for the next few months on this thread.




How will you know when to pounce on the new lows?

Page 313 of the "XAO Technical Analysis" thread covers what some of the experts on this forum thought right at the bottom of the market in 2009

https://www.aussiestockforums.com/forums/showthread.php?t=4888&page=313

No one saw the bottom...however a few did see the recovery after it was a month or so old....will you be able to see it?


----------



## quadfin

chrislp mentioned this thread & with the reporting season starting up i will be back

Is it notr good to use both FA & TA, trading or ST or Lt


----------



## chrislp

quadfin said:


> chrislp mentioned this thread & with the reporting season starting up i will be back
> 
> Is it notr good to use both FA & TA, trading or ST or Lt




My opinion is that you need to find what suits you personally & stick to it.

Whether you use one method exclusively or a combination of both.


----------



## Boggo

LifeChoices said:


> I think I'm going to enjoy earning 6% interest in the bank account *waiting to pounce on new lows* as you post your losses for the next few months on this thread.




Often a bit like a dog chasing its tail, when he catches it what then ?



So_Cynical said:


> How will you know when to pounce on the new lows?




And more importantly, how do you recognise old highs, the exit is more important than the entry. See both the PEN and RED threads for examples of that.



quadfin said:


> chrislp mentioned this thread & with the reporting season starting up i will be back
> 
> Is it notr good to use both FA & TA, trading or ST or Lt




Whichever gives you the first heads up in either direction, see chart below.



chrislp said:


> My opinion is that you need to find what suits you personally & stick to it.
> 
> Whether you use one method exclusively or a combination of both.




Agree with a combination of both approach.
A recent example was FMS, it was a 14 cent stock that is in the ASX 300, there is usually a fundamental reason for it being in that group which is a heads up in itself. Looking at its price at the moment its obvious that someone else saw fundamental value in it too.

The we have QBE (monthly chart below), also in the ASX 300. Which came first, the chicken or the egg, the technical analysis or the fundamental analysis.
Does anyone else see where the warning signal was ?

I lean way more towards the technical analysis, it picked up something was happening with FMS a week before the price nearly doubled.
It is a much more reliable barometer, is a more reliable indication of overall market sentiment and is usually a heads up way ahead of the direction where the fundamentals are going to eventually take you as was the case of both FMS and QBE.

QBE is a perfect example of the errors associated with a dependency on the dividend being the life support in a decline.

There are numerous other examples that I could use.

Just my 

(click to expand)


----------



## tech/a

> *My opinion is that you need to find what suits you personally & stick to it.*




I often hear this on this topic.
I've been trying to list personalities to suitability of style.

To get my head around this accepted rhetoric.
My personal view is that the quote above is simply another one of those true-isms accepted by the masses without much thought.

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

Im yet to find where one would say

Yep Ill trade Fundamentally because of x
or 
Yep technically because of y

I think more to the truth of the matter is experience or lack of in each analysis style.
Anyone care to enlighten me?

I trade technically because the 10000 hrs of learning in *MY VIEW* gives me *FAR FAR* quicker and concise information.
It gives me a massive range of trading style types un available to the fundamental trader.
It also gives me something I can evaluate and test BEFORE I embark on investing---trading it.

My list of personality types is far longer and better served by Technical trading then that made up with Fundamental trading as its chosen analysis tool.---maybe your list is far different to mine?

Interested in responses.


----------



## Julia

You've omitted the large group who wouldn't even know what you meant if you asked if they invested/traded fundamentally or technically.

The people who read in the paper or some magazine that e.g. "QBE is a very well managed, very successful company and should be included in a core portfolio".

Or the ones who say "Woolworths must be a great investment because everyone has to eat".

"Gee whiz, look at the dividend yield on Telstra".  How can you go wrong with that!"

Plenty more similar examples.

No thought re that company's position vis a vis its competitors.

No thought re that company's share price trend.

No calculation as to whether those supa dupa dividends compensate for the diminished capital as the SP falls.

Let alone debt levels, EPS, etc.


----------



## tech/a

Julia said:


> You've omitted the large group who wouldn't even know what you meant if you asked if they invested/traded fundamentally or technically.
> 
> The people who read in the paper or some magazine that e.g. "QBE is a very well managed, very successful company and should be included in a core portfolio".
> 
> Or the ones who say "Woolworths must be a great investment because everyone has to eat".
> 
> "Gee whiz, look at the dividend yield on Telstra".  How can you go wrong with that!"
> 
> Plenty more similar examples.
> 
> No thought re that company's position vis a vis its competitors.
> 
> No thought re that company's share price trend.
> 
> No calculation as to whether those supa dupa dividends compensate for the diminished capital as the SP falls.
> 
> Let alone debt levels, EPS, etc.




Julia Id place them in the Fundamental camp.
Not as a Fundamental Analyst but more on Fundamental background.
Same as a technical background for someone who sees or has pointed out a Trend 
and buys based on that.
Its a technical background not analysis.

IMO


----------



## odds-on

Hi,

I am after a book recommendation. Is anybody able to recommend a techincal analysis book written by an author who has produced 20+% CAGR on total funds employed over 10 years? I would like to add a TA component to my stock picks.

Cheers

Oddson.


----------



## notting

tech/a said:


> I think more to the truth of the matter is experience or lack of in each analysis style.
> Interested in responses.




A really great point.

It can be a mighty expensive learning curve for the bold!

Personally, I find fundamentals give me confidence to Hang on Harvey and buy hard in total panic.  Suits my psychology.  As does putting on massive shorts(I'm very skinny) to cover things at times when markets are gapping hard over nights. 

However, it can be a long time between drinks which is far less *entertaining*!

However, even then you could argue that even fundamental analysis is just *fooling yourself*, as it is really an intuitive trend following method. 
With *no fundamentals* backing it in *reality*! 
Human natures as fundamental as it gets!

Your thinking 'gee wiz, these great banks usually trade at this multiple with that much dividend, they are absolute screamers! - That's simply anticipating previous tends to continue. There's nothing fundamental about it.
In the end, I suppose, it's beating rent and property appreciation less expenses, and the best I can do with a bank deposit. 
This bank used to grow faster than both all things included.
It's big with government backing! Is bloody low *relatively*!
So I'll take the punt and hope that money isn't replaced with IToken.
Let's all go and short US bonds!


----------



## Boggo

Julia said:


> The people who read in the paper or some magazine that e.g. "QBE is a very well managed, very successful company and should be included in a core portfolio".
> 
> Or the ones who say "Woolworths must be a great investment because everyone has to eat".
> 
> "Gee whiz, look at the dividend yield on Telstra".  How can you go wrong with that!"
> 
> Plenty more similar examples.




Agree Julia.

If you guys wan a laugh then have a look at the "experts" tips in the finance section of The Weekend Australian.

The only one of the experts that I would give any time to would be Elio from StockDoctor (lincoln Indicators), those guys have the runs on the board from the past, the rest are just going with the usual top 50.

People pay money to these people - amazing.


----------



## tech/a

odds-on said:


> Hi,
> 
> I am after a book recommendation. Is anybody able to recommend a techincal analysis book written by an author who has produced 20+% CAGR on total funds employed over 10 years? I would like to add a TA component to my stock picks.
> 
> Cheers
> 
> Oddson.




My system Tech trader turned $30,000 to $370,000 in 5 yrs and had an open peak value of $428,000 from 2002 to 2008.

I closed all positions in 2008.
It was traded live and is still on one of the forums pretty well complete.

Sorry I dont publish books.

Nick Radge who has been my mentor for 20 yrs does.
His latest is soon to be released.
In it Tech trader and many others will be discussed.

Unfortunately you wont be able to return 20% on capital over 10 yrs from reading a book.

I've had no luck with Flying although the Author has flown over 8000 hrs. and never crashed.


----------



## odds-on

tech/a said:


> My system Tech trader turned $30,000 to $370,000 in 5 yrs and had an open peak value of $428,000 from 2002 to 2008.
> 
> I closed all positions in 2008.
> It was traded live and is still on one of the forums pretty well complete.
> 
> Sorry I dont publish books.
> 
> Nick Radge who has been my mentor for 20 yrs does.
> His latest is soon to be released.
> In it Tech trader and many others will be discussed.
> 
> Unfortunately you wont be able to return 20% on capital over 10 yrs from reading a book.
> 
> I've had no luck with Flying although the Author has flown over 8000 hrs. and never crashed.
> 
> View attachment 45795




No worries. I will keep searching, i have read a few fundamentals based books by fund managers who have outperformed the market for many years and was wondering if there was an equivalent tehnical analysis book. I have read a few trading books which i found interesting just want to read one on technical analysis by an author with a track record.

Cheers

Oddson.


----------



## tech/a

odds-on said:


> No worries. I will keep searching, i have read a few fundamentals based books by fund managers who have outperformed the market for many years and was wondering if there was an equivalent tehnical analysis book. I have read a few trading books which i found interesting just want to read one on technical analysis by an author with a track record.
> 
> Cheers
> 
> Oddson.




Who are the Fundamental Fund Managers with the track record?
Many successful Fund Managers have floors of quants crunching technical systems.

Have you *considered* that being able to recognize an opportunity that lasts only a Short period of Time may be more life changing than achieving 20 % return over a long period of time?


----------



## Wysiwyg

tech/a said:


> My system Tech trader turned $30,000 to $370,000 in 5 yrs and had an open peak value of $428,000 from 2002 to 2008.




That looks great but the fact leverage was used in a strong bull market adds further perspective.



> We started with *$30K on margin* which gave us around *100K to trade*.


----------



## odds-on

tech/a said:


> Who are the Fundamental Fund Managers with the track record?
> Many successful Fund Managers have floors of quants crunching technical systems.
> 
> Have you *considered* that being able to recognize an opportunity that lasts only a Short period of Time may be more life changing than achieving 20 % return over a long period of time?




Joel Greenblatt - Gotham capital performance was impressive
Mohnish Pabrai
Peter Lynch

Do not worry I am not a "fundamentalist",each to their own as far as i am concerned, i just want to read a book by somebody who has consistently made a lot of money using TA.

Cheers

Oddson


----------



## barney

Wysiwyg said:


> That looks great but the fact leverage was used in a strong bull market adds further perspective.





Agree ............ 

(My comments below are for traders who are either new to the game,  ... or oblivious to the fact that they *don't actually know everything*!!)

Bottom line for me is  (particularly if we are talking Stocks) ......

*F/A is a "longer term"*  "I see value" scenario

T/A is a "shorter term"  Lets take advantage of the *current market conditions *which "take advantage" of the current F/A conditions !!  

eg.* Position size yourself *accordingly, *relative to the market* in general ....  and relative to *your own * personal financial situation


----------



## tech/a

Wysiwyg said:


> That looks great but the fact leverage was used in a strong bull market adds further perspective.




You should trade leveraged in strong markets
The method is a long-- Longterm trading method
Many of us did the same with property leveraging even heavier.

The problem is?


----------



## tech/a

I would also argue that everyone ( on this thread at least) is missing the key ingredient to wealth creation.
It has nothing to do with T/A or F/A.


----------



## Wysiwyg

tech/a said:


> You should trade leveraged in strong markets
> The method is a long-- Longterm trading method
> Many of us did the same with property leveraging even heavier.
> 
> The problem is?



No problem at all. I look forward to my opportunity.


----------



## Alpha_Bet

tech/a said:


> I would also argue that everyone ( on this thread at least) is missing the key ingredient to wealth creation.
> It has nothing to do with T/A or F/A.




it's easy.
everytime i visit this site i'm informed via pop up i've won an iphone.
if i keep visiting this site and winning iphones
i'll do a big ebay auction
and retire......

talk about an insult to ones intelligence.

oh, and the secret is edge and compounding..........


----------



## notting

When it comes to trading, I find that I'm still wrong most of the time.  
But have these small windows when I find I'm just getting it right, I crank it up pretty hard still expecting to be wrong.  
Never expect to be as good a tech analysts as Nick Radge or Techa even if I studied it for a life time!  Knowing that makes me a great tech analyst - strength.  
Techs free and Nicks very reasonable.
I'm too lazy and stupid to be a good fundamental analyst so I just listen, listen and ask questions of smart people at some point something really just makes so much sense.
Know thy self. Stupid? - delegate and delegate.

Trend following has been such a hit through the last bull market, it like everything else, is going to have it's ruptions - sideways - Japan like new *trend*!  Has been for 3 years, how to play it?  
Small short paired to big long that stacks up fundamentally after weekness. Increase short on pair, as it rises, but not to larger than the long, market keeps falling buy the short buy more of the long if you still have room for it.  Reduce the long if it's still allot longer after a rise. Start shorting the pair again, as it rises.  Keep doing it.  
I always think I'm going to lose on the short because I’m a bull and an optimist most of the time, but I keep making money on the short which just proves I have no idea!
I go to bed at night thinking I should or baught back all that short, futures are up, I'm a dick.  Then the markets down!
I'm a loser!  
I can't do anything right which for some stupid reason is profitable!


----------



## Joe Blow

Alpha_Bet said:


> it's easy.
> everytime i visit this site i'm informed via pop up i've won an iphone.
> if i keep visiting this site and winning iphones
> i'll do a big ebay auction
> and retire......




Hi Alpha_Bet, ASF does not generate popups of any kind. This advertisement is probably being generated by some kind of malware or spyware on your PC.

I recommend installing some anti-virus software such as AVG and scanning your PC for infections.


----------



## Alpha_Bet

Joe Blow said:


> Hi Alpha_Bet, ASF does not generate popups of any kind. This advertisement is probably being generated by some kind of malware or spyware on your PC.
> 
> I recommend installing some anti-virus software such as AVG and scanning your PC for infections.




Joe, i retract my sarcastic remark. 
and good to hear.

the ol' banger i use for net duties needs a tune up by the sounds of things....

cheers


----------



## tech/a

> Oh --- and the secret is edge and compounding




While important to some edge is not necessary
Any idiot can make money in a bull run--- housing boom---- oil shortage----
Compounding --- sure if your profitable.

But in *MY* view not *THE* secrete to wealth creation.


----------



## Alpha_Bet

tech/a said:


> While important to some edge is not necessary
> Any idiot can make money in a bull run--- housing boom---- oil shortage----
> Compounding --- sure if your profitable.
> 
> But in *MY* view not *THE* secrete to wealth creation.




saving more than you spend.......

for me it has been edge & gearing
and persistence...........................


----------



## tech/a

Ok

--- made your million yet---
Rhetorical question
Meant for you to look at your secretes to wealth and see if they have worked.

In answer to your ( subconscious ) question --- yes


----------



## Alpha_Bet

tech/a said:


> Any idiot can make money in a bull run




and the ability to take the other side and go short........


----------



## Alpha_Bet

tech/a said:


> Ok
> 
> --- made your million yet---




talking of money like that is considered quite vulgar

i don't invest 
i trade

i eat what i kill.............


----------



## tech/a

Alpha_Bet said:


> talking of money like that is considered quite vulgar
> 
> i don't invest
> i trade
> 
> i eat what i kill.............




Fortunately I don't have to
Couldnt think of anything worse to do for a living.

night all


----------



## Alpha_Bet

tech/a said:


> Fortunately I don't have to
> Couldnt think of anything worse to do for a living.
> 
> night all




sorry

i thought this was a trading website.............


----------



## notting

Alpha_Bet said:


> sorry
> 
> i thought this was a trading website.............




Na. where just lonely old Geezers who chat too much! :cuckoo:


----------



## Alpha_Bet

notting said:


> Na. where just lonely old Geezers who chat too much! :cuckoo:



 hey notting 
i thought ones skin got more thick as one got older


----------



## Alpha_Bet

tech/a said:


> I would also argue that everyone ( on this thread at least) is missing the key ingredient to wealth creation.
> It has nothing to do with T/A or F/A.




i've provided the community with what i consider some key ingredients to 'a' wealth recipe.

would sir be so kind to as to give a tidbit to us....

the great unwashed masses...............?


----------



## tech/a

Alpha_Bet said:


> talking of money like that is considered quite vulgar
> 
> i don't invest
> i trade
> 
> i eat what i kill.............






Alpha_Bet said:


> sorry
> 
> i thought this was a trading website.............






notting said:


> Na. where just lonely old Geezers who chat too much! :cuckoo:






Alpha_Bet said:


> hey notting
> i thought ones skin got more thick as one got older






Alpha_Bet said:


> i've provided the community with what i consider some key ingredients to 'a' wealth recipe.
> 
> would sir be so kind to as to give a tidbit to us....
> 
> the great unwashed masses...............?




Yeh really has me motivated.
Just like the thread I started on Technical Analysis.
Just get rubbish for effort.

So work it out yourself.
Like I did.


----------



## notting

tech/a said:


> Yeh really has me motivated.
> Just like the thread I started on Technical Analysis.
> Just get rubbish for effort.
> So work it out yourself.
> Like I did.




Even the greatest band leaders get heckled.

Heckler, "Get a hair cut."
"What, an look like you," Mick Jagger.(in the early days)

There r far more appreciating eyes and ears than loose mouths.

A generous spirit never knows poverty!  Keep it, I say!

My comment was taking the Micky out of myself, sorry if it sounded otherwise.



Alpha_Bet said:


> sorry
> 
> i thought this was a trading website.............





I was also trying to convey that there is no trading here it's a chat room!!!


----------



## Alpha_Bet

tech/a said:


> So work it out yourself.
> Like I did.





I have


----------



## tech/a

Alpha_Bet said:


> I have




End of conversation.


----------



## sunnysyd

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

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


----------



## Alpha_Bet

tech/a said:


> End of conversation.




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

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

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

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

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


----------



## chrislp

tech/a said:


> I often hear this on this topic.
> 
> My personal view is that the quote above is simply another one of those true-isms accepted by the masses without much thought.
> 
> Shwagger who seems to be attributed as the source of the quote while an accepted Author* failed* as a futures trader.
> 
> Anyone care to enlighten me?





[video=vimeo;19621172]http://vimeo.com/19621172[/video]




Really?

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


----------



## tech/a

chrislp said:


> [video=vimeo;19621172]http://vimeo.com/19621172[/video]
> 
> 
> 
> 
> Really?
> 
> Your "mentor" is where I learnt my whole trading philosophy from.




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


----------



## chrislp

tech/a said:


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


----------



## tech/a

tech/a said:


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




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


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

So yes Really.---in my case.


----------



## dutchie

Even the government goes for Technical Analysis.

They are obsessed with TA.


----------



## robusta

dutchie said:


> Even the government goes for Technical Analysis.
> 
> They are obsessed with TA.




Do tell


----------



## So_Cynical

Back in October 2010 robusta issued the challenge.

https://www.aussiestockforums.com/forums/showthread.php?t=2694&page=7



robusta said:


> Being a fundamental investor I miss out on many opportunities to make money open to technical investors.
> A quick glance at the ASX Top 20 reveals 11 companies that will for one reason or another probably never be considered as investment candidates. (AMP, BXP, FGL, MQG, NCM, ORG, RIO, SUN, TLS, WDC, WPL).
> 
> Over the entire ASX I estimate only about 10% of companies tick enough of my boxes for me to consider them. I am sure a lot of investors have made a lot of money out of the above stocks.
> 
> From a technical point of view this creates a huge opportunity cost. At any given time there must be numerous stocks in the middle of a huge up-trend or hitting key resistance points.... you fill in the blanks.
> 
> As I have previously explained the technique I follow consists of identifying exceptional businesses, buying them for less than they are worth and holding those businesses until either they become significantly over valued or cease to be exceptional businesses.
> 
> *I thought it may be interesting to list 6 businesses that meet my criteria and I think should out perform the market in the long term.*
> Disclosure 4 of these stocks are also in Roger Montgomery's Valeline portfolio.
> These businesses are all about or below current intrinsic values.
> 
> *If I assume a equally weighted portfolio and track it against the ASX 200 it should be interesting to see the results over the medium to long term.*
> 
> It would also be interesting to get any input from any other points of view to see any correlation between different investment techniques*. Or if anyone wants to put up a alternative portfolio?*
> 
> CBA       $50.50
> CSL       $32.50
> JBH       $19.59
> MCE      $4.95
> FGE       $4.05
> FRI        $1.40
> 
> Portfolio total $112.99       ASX 200 4694.90   *20/10/2010*




And i was the only one to respond.



So_Cynical said:


> Ok here is my 6 at today's close (i own stocks with *)
> 
> 
> BPT   0.615*
> CPU   9.71*
> TSI   0.665*
> PTM   4.75*
> CIF   1.15
> APN   1.95
> 
> Portfolio total $18.84 were gona include dividends in this?




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

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



So_Cynical said:


> OK so im happy to go with your dividends...mine added up to $1831 whole dollars, and my TSI money = $12706...sticking with the new entrant 10K theme ill plonk 10K into TOL -Toll Holdings @ $4.71 and put half the the rest into an average down in CPU @ 8.60 and the other half into APN @ $1.245...so.
> 
> 
> TOL $10000 = 2123 Shares @ 4.71
> CPU $2268 = 263 Shares @ 8.60
> APN $2268 = 1821 Shares @ 1.245





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

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


----------



## pixel

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

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

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

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

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

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


----------



## wciszak

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


----------



## TikoMike

pixel said:


> A Technical Analyst and a Fundamental Analyst are chatting about the markets in the kitchen.
> 
> Accidentally one of them knocks a kitchen knife off the table, which lands right in the fundamental analyst’s foot!
> 
> The fundamental analyst yells at the technician, asking him why he didn’t catch the knife?
> 
> “You know Technicians don’t catch falling knives!” the technician responded.
> 
> He in turn asks the fundamental analyst why he didn’t move his foot out of the way?
> 
> The Fundamental analyst responds, “I didn’t think it could go that low”.




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


----------



## Knobby22

Bit of truth in the joke though.

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

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


----------



## Knobby22

Knobby22 said:


> Bit of truth in the joke though.
> 
> All fundamental investors are tempted to catch falling knives, but it is very risky behaviour.
> It pays to know a few basics that technical analysts use to reduce risk.
> 
> Fundamental investing works but it is hard. You are dealing with old information and can fall into traps set by a CEO wanting to make his bonus. The aim of the Fundamental investor is, like the technical guys, is to  predict the future.




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


----------



## DocK

Knobby22 said:


> Bit of truth in the joke though.
> 
> All fundamental investors are tempted to catch falling knives, but it is very risky behaviour.
> It pays to know a few basics that technical analysts use to reduce risk.
> 
> Fundamental investing works but it is hard. You are dealing with old information and can fall into traps set by a CEO wanting to make his bonus. *The aim of the Fundamental investor is, like the technical guys, is to  predict the future*.




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


----------



## Knobby22

DocK said:


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




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

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

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

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

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

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

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


----------



## jancha

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


----------



## TikoMike

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

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

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


----------



## DocK

Knobby22 said:


> Yes and No. I know where you are coming from.
> 
> Obviously if you don't care about fundamentals you are not trying to predict where its going. however you are trying to predict a percentage of winning trades.
> 
> You are trying to predict where the share price is going and relying on it to change substantially.
> 
> You are using semi -proven human behaviour patterns to predict in which direction the share/market changes.
> 
> Sure, you are using capital management so you don't have to be right all that often.
> 
> You need positive expectancy to make money. You need an edge.
> 
> That's why you test the theories before implementing them. You can't tell me that all people who try to use technical analysis do well. There are many who lose, just as occurs (probably even more so) in fundamental investing.




Agreed, there are many who lose using either system, or even a combination of both.  I was simply making the point that quite often technical analysts are not concerned with predicting where the market may be heading - just on reacting to what it does.  As you say, you're relying on the "edge" to make the money, and the "edge" has probably been based on historical data.  I guess it's fair to say that the "edge" relies on markets/humans behaving in the established pattern used in the historical data - so yes, in a way the technical analysis "predicts" that those established patterns will be repeated in the future.  I guess that is why a trend-following system will not perform particulary well in a prolonged sideways market



jancha said:


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




Agreed again.  Although I prefer technical analysis for myself, I can't say I've never bought a share in a company that I feel is well run and has proven profitable performance, but has been beaten up by poor sentiment.  Once in the trade I'd use technical analysis to set an exit - rather than trust in my own "prediction" of where I think true value sits.   I'm not fanatically set on one method or the other - whatever works for you I reckon - and I'd say that would be a combination of both methods for quite a few.


----------



## Julia

jancha said:


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



Refreshing to find some sensible and balanced comments on this thread instead of the usual vehement criticism of FA by TAs and vice versa.


----------



## robusta

So_Cynical said:


> Back in October 2010 robusta issued the challenge.
> 
> Anyway here we are 18 months from the original post and i though it would be interesting to see how the comparison of robusta's "value" portfolio was travelling against both my portfolio of discretionary "cheap high dividend" stocks and the ASX200
> 
> Looks like im way out in front of both robusta and the ASX200
> ~




Well done So_Cynical, you have outperformed by a fair margin. Sorry I missed this post.

My buy and hold strategy does appear to be lacking with these stocks, I would probably like to ditch MCE and take profits on CBA and CSL but as I don't have any fancy software this may be too much hassle as I remember we were including dividends as well. 

That is not to take anything away from your performance, you have made money out of companies I would never consider.


----------



## tech/a

*There are NO SECRETS *and here they are!

Firstly *ALL analysis "works" in a bull market*. Anyone can make a profit in a strongly trending bull market--just ask your local taxi driver.

Its pretty common knowledge and one of the TRUE truisms of trading/investing that the market will trend 30% of the time and either distribute or accumulate in consolidations during the other times--70 %.

Its also true that there will be trends in sometime frame at any one time--during consolidations.

So if we are going to trade/invest profitably we best be able to recognise that we need to find a trend 1 bar or more--in a time frame so we can profit.

Our analysis---at best--- points us to set-ups which give us the ability to anticipate price action both--- Fundamental and Technical. At best its a 50/50 result over very long periods but by identifying where we are in a move (Consolidation or Trend) in a time frame we can be better prepared to trade or invest in the time frame chosen. Its not about quantity or quality of information---just look at the PEN or RED threads. Nor the pattern or
Past history of a chart. At best *BOTH* place us in a position of *ANTICIPATION*.

We should be constantly looking for set-ups which point to a trend --- be it within a lower time-frame in a consolidation or a breakout in any time frame.

Most trends last longer than expected and most consolidations resist breaking out in either direction longer than expected. 
In the short term we can identify time periods which are likely to trend in a direction for a number of bars ( Trend or Counter trend trades).This can swing the odds in our favour---giving us one string to the bow of profit---anticipation.

*Radge once said that " It doesn't matter if your wrong---only how long you stay wrong "*

So the best way to minimise loss through being wrong too long is to have either a stop loss---OR a mechanism in your analysis which tells you that your analysis is wrong---quick enough to mitigate risk.

*"Let your winners run"*

The next string to the bow. You need to have either an anticipated target OR a mechanism to determine the end of your trading trend in your time frame which maximises your time in a trade in your chosen direction.

You see there are ONLY 3 ways (Other than Arbitrage) That you can profit from your Trading/Investing.

More aggregate winning profitable trades than aggregate losing trades.
OR
Bigger aggregate Winning trades to Aggregate losing trades.
OR
A combination of both.

If you know the above and you've put those understandings in place you'll be trading time frames and set-ups that in the long run will deliver you positive expectancy through your trade management and the understanding that there are *NO SECRETS*. 

The traders* trap *is to constantly buy that new book or try that new trading technique
in the hope that it will find and give an EDGE.

That edge is staring you in the face 
*REGARDLESS OF METHOD USED.*


----------



## nulla nulla

Welcome back T/A


----------



## Spongle

As an investment newbie soon to come onto a modest amount of cash I find myself wrestling with the TA vs FA issue...

When I first found all this garbage interesting (bout 2yrs ago) I found myself drawn to Technical analysis as I enjoy poring over charts and trying to find re-emerging patterns that could predict future actions more than half the time.
I figured that certain patterns reflect certain behaviour and that said patterns were likely to repeat themselves as they reflected the actions of human beings and were more than likely to reoccur.

Barring significant external factors relating to the market it seems (from my meager efforts utilising technical analysis) that TA works but seems to be an art more than a science. The hardest part appears to be a) finding a good example of a chart that stands out enough to be exploited     b) not seeing things in a chart that arn't there 
c) figuring that when I do see something it will probably only work about 60 - 70 % of the time (again: I am an amateur at this stuff)

Calculating the fundamentals interests me much less but seem to hold alot of weight re a) purchasing securities at lower prices b) giving peace of mind re overt pessimism/optimism in the market c) knowing that a security should hopefully reach a mean price (between the ocsillations of price over various time periods) that will occur and be profitable to a stockholder and d) be a sound investment AND a stock that can be traded not just the latter.

Use both I figure... why not hey?


----------



## systematic

Spongle said:


> Use both I figure... why not hey?




Absolutely agree!  And not necessarily together even.


----------



## Value Hunter

Technical analysis = squiggly line voodoo. Yeah I really just said what most of us fundamental guys actually think.

I have yet to hear of a single person that has made a few hundred million from technical analysis alone and managed to actually keep it until death. As for fundamental analysis there are plenty of billionaires who fit that category.

Tell me what does a technical analyst do when buying an unlisted asset with no price history such as a small business for sale? They have to look at the fundamentals don't they? 

Technical analysis is absolute non-sense and has no basis in fact. In fact calling it analysis is akin to labeling a tarot card using fortune teller an analyst.


----------



## AlterEgo

Value Hunter said:


> Technical analysis = squiggly line voodoo. Yeah I really just said what most of us fundamental guys actually think.
> 
> I have yet to hear of a single person that has made a few hundred million from technical analysis alone and managed to actually keep it until death. As for fundamental analysis there are plenty of billionaires who fit that category.
> 
> Tell me what does a technical analyst do when buying an unlisted asset with no price history such as a small business for sale? They have to look at the fundamentals don't they?
> 
> Technical analysis is absolute non-sense and has no basis in fact. In fact calling it analysis is akin to labeling a tarot card using fortune teller an analyst.




You clearly have no idea! Tell that to the prop firms that are taking large sums of money out of the market on a consistent basis, and all the firms running HFT systems, etc. You think that's just luck?

I think many people using fundamental analysis have little idea as to what technical analysis really is, or rather, little idea of the methods the successful technical people are using. There are methods that don't use fundamental info (and therefore must be regarded as 'technical'), but do not rely on interpretation of 'squiggly lines' like moving average crossovers, MACD, Head & Shoulder patterns, etc. I personally don't think much of that type of stuff works (although I could be wrong), however there are other non-fundamental methods that do work. But I'm not about to go in to detail about that, as I reckon you're just a troll trying to get a bite (why else post the same message in 5 different threads). Or else you are very closed minded to other ways of doing things. Just because you haven't been able to make money that way, or just because you just don't understand it, or it doesn't make sense to you, doesn't make it invalid.

Anyway, that's all I have to say on the matter. I'm not going to get in to an argument with you about it. It makes no difference to me what you believe.


----------



## cynic

AlterEgo said:


> You clearly have no idea! Tell that to the prop firms that are taking large sums of money out of the market on a consistent basis, and all the firms running HFT systems, etc. You think that's just luck?
> ....
> Anyway, that's all I have to say on the matter. I'm not going to get in to an argument with you about it. It makes no difference to me what you believe.



By responding, you actually did enter into an argument.

I do agree that those comparing T/A to voodoo know nothing whatsoever about the practice of voodoo!

Fortunately, not all F/A practitioners think that way and some of them have been known to complement their trading with a smattering of T/A!


----------



## Value Hunter

I am no expert on high frequency trading but from what I have read in articles and seen in documentaries the majority of high frequency trading systems seem to make money by front running large buy or sell stock orders (usually from institutional investors). Many of them have very high computing power, the highest speed internet, have their computers close to the exchange where orders are processed in order to get an advantage in terms of trade execution by a few milliseconds. 

In addition to that there have been many claims of market rigging (accompanied by investigations) in regards to high frequency traders who somehow get leaked or insider access to classified information so they know the what orders will be placed before they are actually visible to the market.  

I doubt many high frequency traders legitimately make money from technical indicators. However that being said I admit I do not know too much about the topic and I could be wrong about all of the above. Simply put high frequency trading is something I care little about because it doesn't affect my investing strategy at all (buy assets at or below intrinsic value).


----------



## Value Hunter

Cynic in my opinion a proper fundamental analyst does not consider technical indicators at all. To me it shows they either lack confidence in their valuation or investing process as a fundamental analyst or they lack patience in waiting for their return to be realized. If you can't confidently value a business or you don't have the necessary patience to wait for your return to come then you should not be using fundamental analysis at all. 

The only billionaire I know of who uses technical analysis is George Soros. He is a speculator not an investor and he primarily uses fundamental and psychological analysis as well as inside information possibly sometimes with a little bit of basic technicals thrown in.


----------



## cynic

Value Hunter said:


> I am no expert on high frequency trading but from what I have read in articles and seen in documentaries the majority of high frequency trading systems seem to make money by front running large buy or sell stock orders (usually from institutional investors). Many of them have very high computing power, the highest speed internet, have their computers close to the exchange where orders are processed in order to get an advantage in terms of trade execution by a few milliseconds.
> 
> In addition to that there have been many claims of market rigging (accompanied by investigations) in regards to high frequency traders who somehow get leaked or insider access to classified information so they know the what orders will be placed before they are actually visible to the market.
> 
> I doubt many high frequency traders legitimately make money from technical indicators. However that being said I admit I do not know too much about the topic and I could be wrong about all of the above. Simply put high frequency trading is something I care little about because it doesn't affect my investing strategy at all (buy assets at or below intrinsic value).




It's great that you are comfortable with your choice of trading style.

As you'll have noticed from these threads, at times there can be disputes over which religion is superior. It doesn't have to be like that!

The virtues of F/A can be extolled without spitting on other analytical approaches. Having said that, I do enjoy a good bun fight!


----------



## Value Hunter

tech/a said:


> *
> 
> "Let your winners run"
> 
> The next string to the bow. You need to have either an anticipated target OR a mechanism to determine the end of your trading trend in your time frame which maximises your time in a trade in your chosen direction.
> 
> You see there are ONLY 3 ways (Other than Arbitrage) That you can profit from your Trading/Investing.
> 
> More aggregate winning profitable trades than aggregate losing trades.
> OR
> Bigger aggregate Winning trades to Aggregate losing trades.
> OR
> A combination of both.
> 
> If you know the above and you've put those understandings in place you'll be trading time frames and set-ups that in the long run will deliver you positive expectancy through your trade management and the understanding that there are NO SECRETS.
> 
> The traders trap is to constantly buy that new book or try that new trading technique
> in the hope that it will find and give an EDGE.
> 
> That edge is staring you in the face
> REGARDLESS OF METHOD USED.*



*

I firmly agree with you on letting winners run (but from a fundamental perspective). If you have bought shares in such a company that keeps increasing their earnings (companies like Cochlear, CSL, Resmed, REA Group, TPG Telecom, Dominoes Pizzas, etc) do not sell the shares just to take a profit, even if the shares get somewhat overvalued. However if a company keeps putting out consistently poor results you should consider selling even of the shares may appear to be undervalued (a.k.a. a falling knife or value trap).

As Peter Lynch pointed out always cut the weeds and water the flowers, not the other way around!*


----------



## cynic

Value Hunter said:


> I firmly agree with you on letting winners run (but from a fundamental perspective). If you have bought shares in such a company that keeps increasing their earnings (companies like Cochlear, CSL, Resmed, REA Group, TPG Telecom, Dominoes Pizzas, etc) do not sell the shares just to take a profit, even if the shares get somewhat overvalued. However if a company keeps putting out consistently poor results you should consider selling even of the shares may appear to be undervalued (a.k.a. a falling knife or value trap).
> 
> As Peter Lynch pointed out always cut the weeds and water the flowers, not the other way around!




In one of your earlier posts you mentioned that you were aware of the misuse of inside information by some traders.

What do you think those insiders might be doing prior to the information becoming public? 

Can you see how this might affect the price behaviours of affected securities (and derivatives thereof)?

Does this not suggest that price action can give useful clues, portending changes in a company's fortunes well ahead of any public announcements?


----------



## Value Hunter

Cynic absolutely insider trading goes on. I have noticed in the days or week leading up to a profit upgrade many stocks quietly trend higher. At the end of the day if a company is doing better than expected many employees (I am not just talking about the top management) will know about it. Even if they don't directly buy shares for fear of being accused of insider trading they may tell family and friends who will buy shares leading up to the announcement pushing the shares up. 

But overall I still don't think its a reliable indicator. Besides by the time you realize the shares are trending up before the announcement it is too late and most of the gain has already been made as it typically happens within a short window (from my observation anywhere between one or two days and a week or slightly longer sometimes)

As for traders if they have the right connections they can get information. E.g. a trader went to the same university and is friends with the chief operating officer of a listed company. They go out for a few drinks one night and some privileged information is exchanged. A lot of hedge fund types and CEOs operate in the same social circles. 

Also hedge funds especially if they are owned by investment banks with a market making division or brokerage firms etc sometimes get leaked access to client trade order books/ledgers.

I don't think price action is a reliable indicator though. Even if a few people have inside information often their impact on price and volume is overwhelmed by the actions/trades of those who do not have inside information thus muddying the signal.


----------



## cynic

Value Hunter said:


> Cynic absolutely insider trading goes on. I have noticed in the days or week leading up to a profit upgrade many stocks quietly trend higher. At the end of the day if a company is doing better than expected many employees (I am not just talking about the top management) will know about it. Even if they don't directly buy shares for fear of being accused of insider trading they may tell family and friends who will buy shares leading up to the anouncement pushing the shares up.
> 
> But overall I still don't think its a reliable indicator. Besides by the time you realize the shares are trending up before the announcement it is too late and most of the gain has already been made as it typically happens within a short window (from my observation anywhere between one or two days and a week or slightly longer sometimes)




It's great that you recognise this. So how do those one or two day windows compare to the timing of company reports and announcements? 

By the way, I am not saying that your choice of F/A is wrong. Many arts are known to have a mixture of advantages and disadvantages.

Styles of market analysis, whether they be T/A, F/A other, are certainly no exception.


----------



## craft

Value Hunter said:


> Technical analysis = squiggly line voodoo. Yeah I really just said what most of us fundamental guys actually think.
> 
> I have yet to hear of a single person that has made a few hundred million from technical analysis alone and managed to actually keep it until death. As for fundamental analysis there are plenty of billionaires who fit that category.
> 
> Tell me what does a technical analyst do when buying an unlisted asset with no price history such as a small business for sale? They have to look at the fundamentals don't they?
> 
> Technical analysis is absolute non-sense and has no basis in fact. In fact calling it analysis is akin to labeling a tarot card using fortune teller an analyst.





The same thing lays at the core of success in any method. If you understand one method well enough to see the core essence of success you shouldn't have too much trouble seeing how other tools could be used. 

Dishing another person's tools is normally a sign of lack of deep understanding in your own approach. I thought on this site our role as FA practitioners was to defend against such short sighted opinions, what's with the attack across so many threads?


----------



## galumay

Value Hunter said:


> Technical analysis = squiggly line voodoo. Yeah I really just said what most of us fundamental guys actually think.




What is your reason for posting the same provocative comment across 5 threads in the forum? It seems to me there must be an agenda.

I hold no trunk with T/A, from my background of mathmatics, science and rational thought I cant take it seriously - none the less its an approach to speculating and even to investing, that very many people adopt as a strategy, so they must be comfortable with it. 

I would be rather surprised if people who use T/A as their primary tool in their strategy would be particularly interested or concerned about what those of us who use F/A as the primary tool think!

It shouldnt be a evangelical approach, why would I care what strategy others use? Why would I care what they think of my strategy.

Whats important is to find an investment or trading strategy that is a good fit for your personality and that you are comfortable wearing day in day out, through volatile sideways, bull and bear markets - and that in the long run provides an acceptable rate of return!


----------



## pixel

On another Forum, which has since folded, we had a fundamentalist who flooded every discussion with his views on how one should be investing. Funny thing is, I met him on a seminar series covering some basic T/A., where, it is probably fair to say, he did not excel.

Based on his own interpretation of both, he bought CVN all the way up to 80c. ... and held all the way down to sub-10c. Technical Analysts suggested rather strongly to sell, each time a technical support level failed to hold. One even stuck his neck out and gave the next low target to the decimal. Our hero rejected every one of them, defending his staunch support as F/A-based.

My point is: Some investors are good at what they're doing. Some may not quite "get it". 
As a Mathematician, I don't have to take sides.

PS: I agree with galumay and others. The number of times an opinion is repeated bears no relation to its validity.


----------



## Knobby22

Fundamental analysis does work but...
-does the average Joe have enough time and knowledge to properly research?

I think many fundamental investors compare themselves to Buffett and Soros to their ultimate detriment.

That said you can as a fundamental investor become an expert in two or three poorly researched small companies and do quite well. As I think Padley said if you spend a good hour researching some of these companies you can become 99.9% more informed than all the other investors. Doesn't work for top 100 companies though. 

Personally I mix fundamental investing with technical and do quite well. Technical is a good way to get an edge and a hell of a lot easier. Fundamental allows you to make the big bets that can 
really make a difference and avoid the duds. You got to know your stuff though. I'm always learning and I have an MBA.


----------



## Value Hunter

As for posting the same or similar comments on five similar threads that was just a texhnique to stimulate debate.
And maybe a little bit of pott stirring too.

Craft, I am surprised as the most successful fundamental analyst in this forum I thought you would be on our side.


----------



## craft

Value Hunter said:


> Craft, I am surprised as the most successful fundamental analyst in this forum I thought you would be on our side.




You don't know everybody's level of success. I built my woefully inadequate initial capital trading technically. I don't mix the two. I prefer F/A. For me the core ingredient to success is universal, just the tools change.


----------



## McLovin

Value Hunter said:


> Craft, I am surprised as the most successful fundamental analyst in this forum I thought you would be on our side.




Why does it need to be about taking sides? Why not just accept that what works for one person may not work for you.


----------



## CanOz

McLovin said:


> Why does it need to be about taking sides? Why not just accept that what works for one person may not work for you.




Simple explanation everybody - Value Hunter is not interested in debate.

Troll


> In Internet slang, a troll (/ˈtroʊl/, /ˈtrɒl/) is a person who sows discord on the Internet by starting arguments or upsetting people, by posting inflammatory, extraneous, or off-topic messages in an online community (such as a newsgroup, forum, chat room, or blog) with the deliberate intent of provoking readers into ...


----------



## systematic

Initially didn't respond as I thought there was something strange going on with the multiple repeat posts.

Will add my two cents to the topic itself, rather than reply to Value Hunter's post.

I don't even think of it as, "F/A vs T/A" or even "F/A _with_ T/A".  I think I even said once - that I don't like either terms.

We all have different perspectives about investing in the markets. 

When it comes to "Analysis" (the key term in the F/A or T/A phrase) mine, for better or worse, is this:

There are 2 types of analysis to pursue in the market - Quantitative analysis, and Qualitative analysis.
You either use one, the other, or both (or none, I guess!)

Therefore, the terms "fundamental" or "technical" don't really mean anything to me.

Many use qualitative analysis - many (most?) who say, "I'm an F/A guy" or "I'm a T/A" guy...are using qualitative analysis.  I lump them in the same boat.

It wouldn't be surprising that, for me personally - I'm a "Qant versus Qual" guy, not a "quant AND qual" guy...and that in the Quant versus Qual debate, I go with quant.

That has a foundation in my philosophy that I'm just not good enough to be a qualitative analyst.  Not in the markets, anyway.  Or at least, I'm not willing to bet, in advance, with my life savings, on the possibility of being good enough!

That's just me.

Fundamentals or technicals?  Again, means nothing to me.

Data is data.  

If it's price data or financial statement data or news data or whatever that can be used successfully (and in a quantitative fashion), I'm all for it.   

I know a lot of people / author's etc don't see it this way.  Most see it still as an "F/A" vs "Q/A" thing...including some who should know better.

Side note:  it's possible to quantify a qualitative approach, but that's not for me, either.


----------



## tech/a

> Data is data.




Some one gets it!!


----------



## Value Hunter

tech/a said:


> Some one gets it!!




There is useful data and then there is noise. Squigly line voodoo (to me its not analysis) is just noise, not data.


----------



## skyQuake

Value Hunter said:


> There is useful data and then there is noise. Squigly line voodoo (to me its not analysis) is just noise, not data.




Depends if the squiggly line stands up to vigorous backtesting

http://www.automated-trading-system.com/evidence-based-technical-analysis-aronson-book/

Also, what is noise to us lowly mortals might be clear signals to the algos at Renaissance Tech


----------



## ukulele

More importantly. 

Is Tech Back?


----------



## tech/a

ukulele said:


> More importantly.
> 
> Is Tech Back?




No a one off---well two off.

https://works.bepress.com/bruce_vanstone/

Some excellent reading.


----------



## pixel

CanOz said:


> Simple explanation everybody - Value Hunter is not interested in debate.
> 
> Troll



CanOz, you got most likely closest to the mark.



systematic said:


> Initially didn't respond as I thought there was something strange going on with the multiple repeat posts.




Same here, Systematic.
VH might have misunderstood Joe's requests to post more : But I don't think that's what Joe had in mind. Pasting the same controversy into a number of long-dead threads may be a lazy way to double one's post count, but if anything, it's a distraction.



> Data is data.
> 
> If it's price data or financial statement data or news data or whatever that can be used successfully (and in a quantitative fashion), I'm all for it.




Exactly. There is one advantage that price and related trading data have over a company's accounts and related news reports: Quantitative (OHLCV) data can easily be accessed by software systems which, in turn, allow fast processing and comparative analysis of entire markets, resulting in a manageable selection of likely candidates for manual, qualitative consideration.
One must, however, know in both phases what one is looking at, what one is looking for, and how to spot the differences. Claiming to follow one or the other doesn't make one an Einstein nor a Buffett.


----------



## cynic

tech/a said:


> No a one off---well two off.
> 
> https://works.bepress.com/bruce_vanstone/
> 
> Some excellent reading.




Do I spy, with my little eye, something beginning with  a breakout?


----------



## Joules MM1

in my letter 







> Dear Paul ....look, i know we dont know each other but gotta say
> you kept mixing up tech analysis with some fundy stuff and now your worth (googles) hmmm, some 4.7BB USD ?
> 
> mate, i mean really....and why do you have to use three names, why not just Paul T. Jones ?
> 
> wait.wot! 4.7BB?!! .....WTF !! from technical analysis _*and*_ a bit of fundamental analysis !!
> 
> yours, insincerely,
> some tosser in a chat room (that's a 6-barrell name, ok, so there!)




 :headshake

we conclude: from this double-blind study that double the blind people follow some ideas, well, blindly
(no placebo could be used....not a sausage!)


----------



## barney

Every trader is different yet likely very similar in their differences (its Friday, I'm thinking deeply)

Personally I like the Spec end of the market so talking Fundamentals might be an oxy moron of sorts

My most profitable trades have all had the same set of criteria, which basically are:-

1) I look for "fundamental" potential 

2)  I accumulate (1) when its had the "technical" bee gees belted out of it

Not rocket science but it works a high percentage of the time.


----------



## Boggo

skyQuake said:


> Depends if the squiggly line stands up to vigorous backtesting




The squiggly line that is confusing VH is reality.
I wonder if he changes channel on the tv when the weather comes on, all that TA would be offensive to him 

Below is an old example of reality vs the theory that is peddled by the "experts" and we all know how well that went


----------



## barney

mmmm .....


----------



## Value Hunter

Boggo I never pay attention to weather forecasts as they are not accurate enough. What is yout point with that chart? There are plenty of instances of technical anlaysis being wromg. What does it prove by taking one example? Besides everyone knows broking analaysts have vestwd interests whixh cause them to be perpetually over bullish.


----------



## Triathlete

galumay said:


> *Whats important is to find an investment or trading strategy that is a good fit for your personality *and that you are comfortable wearing day in day out, through volatile sideways, bull and bear markets - *and that in the long run provides an acceptable rate of return!*




Have to agree with you on that galumay...!


----------



## Boggo

barney said:


> ...
> My most profitable trades have all had the same set of criteria, which basically are:-
> 
> 1) I look for "fundamental" potential
> 
> 2)  I accumulate (1) when its had the "technical" bee gees belted out of it
> 
> Not rocket science but it works a high percentage of the time.




Same here. Sticking with just The All Ords constituents (about 480 stocks) and "belting" them has worked well for for a few years now.

Been around long enough to have seen too many Harris Scarfe's, Onetel's, Billabong's, ABC Learning and Dick Smiths etc to ever let my future be totally dependant on the opinions of some number cruncher who is basing his calculations on the BS of someone who has their own prosperity in mind instead of reality.

Some light reading in this link
http://www.smh.com.au/business/lessons-to-be-learnt-from-abc-learnings-collapse-20090101-78f8.html

PS - VH, its going for 35 degrees in Adelaide tomorrow


----------



## CanOz

tech/a said:


> No a one off---well two off.
> 
> https://works.bepress.com/bruce_vanstone/
> 
> Some excellent reading.




Thanks tech, that's a ton of quality reading, really, I had no idea that was there.


----------



## Newt

CanOz said:


> Thanks tech, that's a ton of quality reading, really, I had no idea that was there.




Yes.  Loved the 3 frank papers on Momentum effects/trading.....


----------



## Value Hunter

Here is an article to back up my view that technical 'analysis' is squiggly line voodoo:

http://www.fool.com/news/foth/2001/foth010105.htm?source=EDSTRB


----------



## cynic

Value Hunter said:


> Here is an article to back up my view that technical 'analysis' is squiggly line voodoo:
> 
> http://www.fool.com/news/foth/2001/foth010105.htm?source=EDSTRB




And what exactly, pray tell, makes you such an expert on voodoo!


----------



## tech/a

Value Hunter said:


> Here is an article to back up my view that technical 'analysis' is squiggly line voodoo:
> 
> http://www.fool.com/news/foth/2001/foth010105.htm?source=EDSTRB





So would you be prepared to take the John Train " Challenge " using Fundamental Analysis?

Even better 10 times
I'll bet the Grand you don't get 50% 5/10 or better

Oh I'll give you the financials (2-3 yrs old ) but you won't know who it is.
We on?


----------



## History Repeats

I recommend everyone read this book Expected Returns, Antti Ilmanen.


----------



## Value Hunter

Comparing technicals to fundamentals is like comparing astrology to astronomy.

Tech/a you are offering a straw man argument. Perhaps if you were talking about purely quantitative fundamental analysis (which tends to have a well diversified portfolio and play the statistical probabilities) then your challenge would be reasonable. However most fundamental analysts myself included consider qualitative factors including the quality of the company's product/service offering, the competition, the quality of the management team, customer profile and potential changes in consumer trends, potential regulatory changes, etc. Whereas pure technical analysts say they only need to look at a chart of price and volume with no other additional information being necessary.


----------



## Value Hunter

By the way I am still waiting for somebody to point out an investor who died a billionaire or even with a few hundred million (no good if they made money and then lost it all later) based purely on profiting from technical analysis with *no fundamental analysis involved*

I am aware of a few people who made some hundreds of millions from technical analysis alone but they all lost most of it back in the end. The infamous W.D. Gann is alleged to have died leaving a miserly inheritance:

http://www.travismorien.com/FAQ/trading/fuGann.htm

Even Jesse Livermoore only allegedly had only a $5 million dollar estate at death (a sizable sum at the time but it hardly compares to the mega rich of his day). See Wikipedia: https://en.wikipedia.org/wiki/Jesse_Lauriston_Livermore

https://www.fool.sg/2014/04/19/becoming-a-billionaire-trader/

The above article points out the rarity of billionaire technical analysts. The one person mentioned in that article that is a supposed technical analyst billionaire actually appears to also use fundamental analysis if you read these two links about him: 

https://en.wikipedia.org/wiki/John_D._Arnold

http://archive.fortune.com/2009/11/23/news/companies/centaurus_john_arnold.fortune/index.htm


----------



## ThingyMajiggy

Value Hunter said:


> By the way I am still waiting for somebody to point out an investor who died a billionaire or even with a few hundred million (no good if they made money and then lost it all later) based purely on profiting from technical analysis with *no fundamental analysis involved*
> 
> I am aware of a few people who made some hundreds of millions from technical analysis alone but they all lost most of it back in the end. The infamous W.D. Gann is alleged to have died leaving a miserly inheritance:
> 
> http://www.travismorien.com/FAQ/trading/fuGann.htm
> 
> Even Jesse Livermoore only allegedly had only a $5 million dollar estate at death (a sizable sum at the time but it hardly compares to the mega rich of his day). See Wikipedia: https://en.wikipedia.org/wiki/Jesse_Lauriston_Livermore




I don't know anything but I'm not sure why how these guys end up in life is any reflection on what analysis method they used, there's a little more things at play in how we "end up in life", huge amount of different factors, how we handle different situations, psychology, things other than trading, life events etc. 

I'm not for or against either in particular, not sure why both can't be used because they both have their places, why not use everything at your disposal? I'm actually super curious to see someone take up tech/a's challenge, as I don't think I've ever seen a short term fundamental trader, not that it can't be done, just not common it seems, most seem to be longer term because I guess the forecasts are futher out, whereas shorter term traders tend to be ones that go for the technical approach. But it would be interesting to see a demonstration of both, say over the course of 12-24 months.


----------



## Boggo

cynic said:


> And what exactly, pray tell, makes you such an expert on voodoo!




Probably his annual subscription to The Motley Fool so that he can provide links to articles that could be better written by a 10 year old 

Let the troll go folks. Messing with people like this who have no ability of their own but are dependant on those who write stupid articles that highlight their lack of knowledge is like wrestling with a pig.
You will both get covered in **** but the pig will enjoy it.

Here is an example of what people like VH are paying for. 
Motley fools are telling their subscribers that GXY is doing well !!
That is great news actually, especially for the squiggly line mob who have been on this since it broke up through $2 

http://www.fool.com.au/2016/05/26/orocobre-limited-shares-soar-as-lithium-price-hype-builds/


----------



## tech/a

As I suspected
Wasted bandwidth

Back into the abyss


----------



## Value Hunter

“I haven’t ever met a rich technician.” – Jim Rogers

This from a man who used to co-manage the best performing hedge fund with George Soros (Quantum Partners). No doubt during his hedge fund years he met plenty of investors and traders and was well connected.


----------



## Value Hunter

Boggo that is an unfair assumption in my last few posts I have linked to multiple sources the Motley Fool being one among others. I have never subscribed to the Motley Fool so I don't appreciate that comment.


----------



## Value Hunter

I am still waiting for somebody to point out a billionaire that made their fortune using technical analysis alone. I got all these technical guys bashing me but honestly I was expecting some of the esteemed fundamental analysts on this forum to stand up for fundamentals and denounce technical as they should.

Warren Buffet used technical analysis as a teenager before abandoning it because it did not work. Here is what he had to say about it.

"I realized that technical analysis didn't work when I turned the chart upside down and didn't get a different answer."

Also I want to hear from a technical analyst. If you were looking to buy a private unlisted business for sale (lets assume it is the first time the business is being put up for sale and therefore has no price history) how would you go about making a purchase decision?


----------



## Boggo

Value Hunter said:


> Boggo that is an unfair assumption in my last few posts I have linked to multiple sources the Motley Fool being one among others. I have never subscribed to the Motley Fool so I don't appreciate that comment.




As far as I am concerned they are all the flamin same, if they were any good the they wouldn't be flogging opinions online for a fee (does the Rivkin method ring any bells  )
The only other way that any of them can make money is by getting an annual subscription from the 95% who can't combine basic fundamentals with technical price action.

Not many of them are Warren Buffet's either, don't see him flogging opinions to the masses.

Maybe all these PO box newsletter companies are saving up to buy the next Berkshire Hathaway or a few million dollars worth of Amex 

There is only one Warren Buffet.


----------



## Value Hunter

http://etfhq.com/blog/2013/03/02/top-technical-analysts/

The above article lists a bunch of successful technical analysts. Now if you read it, out of the billionaires on that list the only one that relies on purely technical analysis is Steve Cohen. Now if you read his Wikipedia page https://en.wikipedia.org/wiki/Steven_A._Cohen the hedge fund he runs was fined $1.8 billion in 2013 by the SEC for insider trading. I suspect much of his fortune was made by insider trading and what the SEC uncovered was just the tip of the ice-berg with the rest being likely too hard to prove. 

I therefore stand by my assertion that there is not a single billionaire who made his fortune purely from technical analysis.


----------



## skyQuake

Value Hunter said:


> I am still waiting for somebody to point out a billionaire that made their fortune using technical analysis alone.




Here's a thought for you -  Technical analysis works _because_ fundamental analysis works. When a billion dollar fund decides stock XYZ is undervalued and does 30% of the average daily volume for a month to try to get set, they leave footprints. The technical trader identifies this through tech/a and hops on. If the technical trader is running a 100bil fund then this is obviously not possible.
You dont see billionaire t/a traders because the have scaling problems - esp since tech analysis tends to turn over the portfolio far more than f/a



> I got all these technical guys bashing me but honestly I was expecting some of the esteemed fundamental analysts on this forum to stand up for fundamentals and denounce technical as they should.




Might as well add heartless short sellers and evil HFTs to the mix...



> Warren Buffet used technical analysis as a teenager before abandoning it because it did not work. Here is what he had to say about it.
> 
> "I realized that technical analysis didn't work when I turned the chart upside down and didn't get a different answer."




I bought a masterchef cookbook once and just could not get it right. Clearly the fault was with cooking itself rather than my masterful skills.
Side note: deliveroo.com.au is amazing



> Also I want to hear from a technical analyst. If you were looking to buy a private unlisted business for sale (lets assume it is the first time the business is being put up for sale and therefore has no price history) how would you go about making a purchase decision?




A pure tech analyst simply wouldn't buy it. 
Or maybe they didn't take a narrow view of things and had a toolbox of t/a AND f/a to provide a rounded view


----------



## McLovin

skyQuake said:


> Here's a thought for you -  Technical analysis works _because_ fundamental analysis works. When a billion dollar fund decides stock XYZ is undervalued and does 30% of the average daily volume for a month to try to get set, they leave footprints. The technical trader identifies this through tech/a and hops on. If the technical trader is running a 100bil fund then this is obviously not possible.
> You dont see billionaire t/a traders because the have scaling problems - esp since tech analysis tends to turn over the portfolio far more than f/a




Finally a sensible post.

And deliveroo is awesome.


----------



## hamli

I'm a retail trader. I'm only concerned about what I can apply as a retail trader and what suits my 'lifestyle'.

- These 'billionaire' fundamentalists that are spoken of, when did they make most of their fortune? i.e Pre-electronic markets or 'Post' electronic markets. What influence did they have on the companies that they invested in?
- And then, on the flip side, how much time do I need to invest per day or per week vs a fundamentalist, in front of a 'screen' at 'specific time frames (market open) to be really successful in 'technical' trading.

There are too many variables and both have value in their own right. And being a technical trader vs fundamental trader, are these really the reasons that determine our success - because this is really what we are unconsciously debating.

Shouldn't we discuss other things such as capital allocation, strategies, risk management in leveraged products etc that are more likely to increase the success of a retail trader.


----------



## craft

Value Hunter said:


> I got all these technical guys bashing me but honestly I was expecting some of the esteemed fundamental analysts on this forum to stand up for fundamentals and denounce technical as they should.




I think you will find that most of the FA guys will (and have) stood up to defend FA when people do the reverse of what you are doing now and stupidly attack because of their ignorance. Quite frankly you are being a dick (duck) at the moment and nobody of substance is going to come and augment your argument.

I suspect your not actually a troll - just at a certain point in your journey - time to pull your head in, there is actually lots you can learn from viewing things from different perspectives and it would be stupid to burn your bridges with some of the people on this site who you may not find anything in common with AT THIS TIME.

The F/A guys at times have had a hell of a go defending themselves on this site - we don't need you stirring the possum by going on the attack.

And besides it would be worth a re-read of systematics posts - the real divide is really more qualitative / quantitative.


----------



## Value Hunter

Some of the advantages of fundamental compared to technical investing/trading are:
-Fundamental investing is *typically* less time intensive as you do heavy research when you make a buy or sell decision then years of minimal maintenance research to stay on top of the story. If you have a concentrated portfolio and low portfolio turnover you can end up investing millions of dollars with a fairly modest number of hours per year maintaining the portfolio. In fact in some cases I can go months at a time without doing any work/research. I feel sorry for all those technical traders who spend hours per day glued to a screen. 
-Fundamental investing *typically * has lower portfolio turnover resulting in potentially: lower/less taxes paid, less brokerage paid and paying less in accounting fees and doing less associated document keeping/filing work. A technical trader with higher portfolio turnover must therefore achieve a higher gross return to get the same net return as a low portfolio turnover fundamental guy. 
-You can invest in highly Illiquid micro-cap stocks because you do not need to be able to jump in and out at a moment's notice and can afford to be patient about exiting your position. Many technical traders won't touch thinly traded stocks. This gives fundamental guys a bigger potential universe to invest in.


----------



## craft

Value Hunter said:


> Some of the advantages of fundamental compared to technical investing/trading are:
> -Fundamental investing is *typically* less time intensive as you do heavy research when you make a buy or sell decision then years of minimal maintenance research to stay on top of the story. If you have a concentrated portfolio and low portfolio turnover you can end up investing millions of dollars with a fairly modest number of hours per year maintaining the portfolio. In fact in some cases I can go months at a time without doing any work/research. I feel sorry for all those technical traders who spend hours per day glued to a screen.
> -Fundamental investing *typically * has lower portfolio turnover resulting in potentially: lower/less taxes paid, less brokerage paid and paying less in accounting fees and doing less associated document keeping/filing work. A technical trader with higher portfolio turnover must therefore achieve a higher gross return to get the same net return as a low portfolio turnover fundamental guy.
> -You can invest in highly Illiquid micro-cap stocks because you do not need to be able to jump in and out at a moment's notice and can afford to be patient about exiting your position. Many technical traders won't touch thinly traded stocks. This gives fundamental guys a bigger potential universe to invest in.




Much better to see you putting up some pro's rather than stupid attacks. You probably don't need to feel sorry for the technical guys, that don't all screen watch, some have longer time frames and probably only place entries EOD some have automated systems and some probably LOVE screen watching. (hell some might even tuck away a few G in a few hours and go surfing for the rest of the day - who knows) 

As you seem pretty convinced about FA, it might actually be more useful to think about and challenge yourself with some of the Cons rather than just reinforcing the Pro's - Hey you never know you could become an interesting contributor.


----------



## Value Hunter

Craft the cons of fundamental investing are:

-It often takes years to know if you are right or wrong.

-Its not harder to know when to sell. Many fundamental guys who do a good job in buying are bad at selling. Its easy to get caught in a value trap:

For example if you buy shares in XYZ corporation for $1.00 and value them at $1.50. The company a few months later comes out with a profit downgrade and the shares drop to $0.90. You however decide after considered analysis that it is still a good business and that the shares now have an intrinsic value of $1.20 and the market has overreacted. The shares are therefore undervalued at the new price and you decide to average down and buy more shares. Over the next few months the shares drift to $0.75 and you buy even more shares. A few months later down the track the company comes out with another profit downgrade. The shares have by now dropped to $0.40. After careful analysis you decide the company is now on a downward spiral and you made a mistake in buying. You cut your losses and sell your shares for $0.40 losing a good deal of money along the way. I'm pretty sure every fundamental investor (myself included) has had some sort of experience like this at one point. If you have a very concentrated portfolio and its a large position this can damage your returns severely and it could take you years to recover from it.


----------



## DaveDaGr8

That's just plain bad portfolio management and has nothing to do with your trading style. You deserve to be slapped if you do this


----------



## Boggo

DaveDaGr8 said:


> That's just plain bad portfolio management and has nothing to do with your trading style. You deserve to be slapped if you do this




x 2


----------



## get better

I think there is a misconception about billionaires making their wealth from fundamental investing alone. Particularly Warren Buffet. If you read about his history, he actually started generating his wealth from managing and building businesses that he owned. One of the things he doesn't get enough credit for is that he is a fantastic at managing people. This skill has helped him immensely in building Berkshire Hathaway into what it is now. This is far different from purely investing based on fundamentals (at least, the way it is viewed in public). 

I haven't checked myself but I wouldn't be surprised if these other billionaires were the same, they most likely had made their wealth via some other venture instead of investing. Investing helps them maximise their money to make more money.


----------



## Value Hunter

Guys would you please explain how a fundamental investor who does not use a stop loss and buys based on the descrepancy between price and value would avoid a loss like this? I must admit these days I generally tend not to buy shares immediately after a profit downgrade. If I already own shares then I will refrain fdom buying more. I usually try to wait for the earnings trend to turn upwards again before I buy (the old downgrades come in threes story). I may make some exceptions in unusual circumstances but as a matter of habit I will usually will not do it. To avoid the example I gave in the scenario.


----------



## cynic

Value Hunter said:


> Guys would you please explain how a fundamental investor who does not use a stop loss and buys based on the descrepancy between price and value would avoid a loss like this? I must admit these days I generally tend not to buy shares immediately after a profit downgrade. If I already own shares then I will refrain fdom buying more. I usually try to wait for the earnings trend to turn upwards again before I buy (the old downgrades come in threes story). I may make some exceptions in unusual circumstances but as a matter of habit I will usually will not do it. To avoid the example I gave in the scenario.




Have you explored the possibility of hedging your portfolio exposure with derivatives?


----------



## hamli

Value Hunter said:


> Guys would you please explain how a fundamental investor who does not use a stop loss and buys based on the descrepancy between price and value would avoid a loss like this? I must admit these days I generally tend not to buy shares immediately after a profit downgrade. If I already own shares then I will refrain fdom buying more. I usually try to wait for the earnings trend to turn upwards again before I buy (the old downgrades come in threes story). I may make some exceptions in unusual circumstances but as a matter of habit I will usually will not do it. To avoid the example I gave in the scenario.




I can only suggest that you chip away at your cost basis. Based on what I've read, you are a fundamentalist, like long stock and want to participate in any significant up moves of that stock and won't mind buying more at a particular price which you determine to be of value.

The typically advertised "covered call" strategy doesn't cater for the above. However, you can vary this by selling a call spread instead & a naked put at the same time. This will allow you to participate in large up moves (i.e past the long call option) and buy more at your put strike price and at the same time, collect premium, which will reduce the 'effective cost' of your stocks.

Alternatively, if you do it by the "books", you can buy puts to protect your stock, but I cannot see the latter as a winning strategy.

Or if the shares that you are investing in do not have liquid options, but all fall into the same sector, then look to see if there are ETFs in that sector that have liquid options. Then as a partial hedge, you can sell call options on the ETF; Or if they have strong correlations to the market index then sell calls on the market index to supplement your long as a partial hedge.

You will need to determine what position sizes appropriate as a partial hedge.


----------



## Value Hunter

I don't use derivatives.


----------



## hamli

Would you say that to some extent, 'Technical Analysis' is like art? Or do most of you have your preset indicators and interpret them as 'black and white' and wait for textbook examples before you enter a trade.

I'm just curious and starting to do some light reading in TA.


----------



## pixel

hamli said:


> Would you say that to some extent, 'Technical Analysis' is like art? Or do most of you have your preset indicators and interpret them as 'black and white' and wait for textbook examples before you enter a trade.
> 
> I'm just curious and starting to do some light reading in TA.




If by "art" you mean "a discipline that you have to study and adjust to your style (of trading/ investing)" then I would say Yes. No standard set of indicators can be considered as a black-and-white, yes/no, buy-here/ sell-there instruction. No matter how many conditions you put into an algorithm, you will only be able to improve your performance statistically. That is why I shun the term "prediction" as in "Where does your T/A predict XYZ's share price to be next week?" (F/A can't give you that assurance either, regardless how many value-picking eggspurts tell you otherwise.)

I use T/A as a "look at me!" alert. T/A software allows me to scan the entire market quickly for stocks that meet a combination of certain condition. Statistically, I have found this set of conditions associated with more successful trade entries. And when a chart shows me that a particular stock has reacted consistently to a my selected combination of conditions in the past, it's long odds it will do so again.

Keep reading and asking questions. In the end, you may still decide it's not your cuppa tea, but you will make the decision from an informed position, not based on bias or ignorance.


----------



## luutzu

hamli said:


> Would you say that to some extent, 'Technical Analysis' is like art? Or do most of you have your preset indicators and interpret them as 'black and white' and wait for textbook examples before you enter a trade.
> 
> I'm just curious and starting to do some light reading in TA.




FA is also "art" in the sense that simple reliance on financial ratios just won't cut it.

In my opinion, TA is purely interested in dealing with the market and its actions whereas FA, as generally practised, tries to deal with the market and a bunch of other bs that may or may not be at all relevant.

To me, a much sounder approach, one within the reach of an individual investor's time and resources for research and understanding, is to see stocks as a Business - and so make investment decision on it as one would when considering a private business. 

Ask not what the Market will do; ask where's the money.

Ask not what the interest rate and economic policies will be; ask whether the company is able enough to adapt and survive the changes.

We therefore chose to analyze stock as a business; Not because it is easy, but because it is hard. And hard work done well by you is how you get the money.


----------



## Ves

Sometimes people miss the point entirely.

Difference in opinion / method = increased opportunity.

For every time I'm right in the market,  I'm equally relying on someone to be wrong (well if I want to be a buyer I need a seller).

In other words,  there is no reason to "convert" another person to be a "Fundie" or a "Techie."

Happy to help others if they ask,  but hell, if they don't want my help then it's better not to complain.


----------



## Rainman

Something that I'd like the dye-in-the-wool TA guys to reveal is just what their annual returns are over a 3, 5, 7 and 10 year period.  

In the end, consistent, market-beating annual returns are what determines whether an FA or TA approach is the superior approach.     

On a related note, it seems to me that if you are a pure technical analyst your focus on price action rather than on value means that you can never allow yourself to be convinced about a trade or an investment.  You are always looking to get out as soon as the trend ends which, for a TA guy, is an ever present possibility. Hence the importance of stop losses.  I imagine (although I am happy to stand corrected) that this view of all stocks as either in an up-trend, a down-trend or treading water precludes you from ever looking upon a stock as a bet-the-farm kind of opportunity.   

Yet, in my view, the big money and the superior annual returns are achieved by precisely these kind of opportunities where the downside is limited but where the upside is, if not unlimited, pregnant with the possibility of doubling, tripling or quadrupling your investment.

In this regard, I'm reminded of a remark made by Stanley Druckenmiller, a guy who achieved a 30% annual return for 20 plus years.  Druckenmiller said:

"_The first thing I heard when I got in the business_ [of investment management].... _was bulls make money, bears make money, and pigs get slaughtered.  I'm here to tell you I was a pig.  And I strongly believe the only way to make long-term returns in our business that are superior is by being a pig_".

What Druckenmiller meant by "being a pig" was betting the farm on those rare opportunities that come along and promise outsized returns.   Again, I am happy to stand corrected but it seems to me that TA guys, perhaps through an acute sense of self-preservation, can never let themselves be pigs in relation to position sizing because they tend not to accept the notion that an investment opportunity can be anything other than price action subject to the whims of transitory market trends.


----------



## minwa

Rainman said:


> Something that I'd like the dye-in-the-wool TA guys to reveal is just what their annual returns are over a 3, 5, 7 and 10 year period.
> 
> In the end, consistent, market-beating annual returns are what determines whether an FA or TA approach is the superior approach.




Let's do it. Post yours since you suggested it and I'll post mine.



Rainman said:


> On a related note, it seems to me that if you are a pure technical analyst your focus on price action rather than on value means that you can never allow yourself to be convinced about a trade or an investment.  You are always looking to get out as soon as the *trend ends* which, for a TA guy, is an ever present possibility.




Being convinced or not is different to being profitable. Pick one. Like it or not - everyone intends to trade trends, TA or FA. For a profit to be made, a trend has to be established. Everyone's definition of trend is different but by the very basic definition, you cannot sell for higher than you bought for without a trend. I would not deem someone as sane if they deem the trend to be down and still stay in it - TA or FA. You may argue it's still undervalued, which makes no sense, seeing you already valued it lower by forecasting a down trend. Trend is no exception to TA or FA. 




Rainman said:


> precludes you from ever looking upon a stock as a bet-the-farm kind of opportunity.
> 
> Yet, in my view, the big money and the superior annual returns are achieved by precisely these kind of opportunities where the downside is limited but where the upside is, if not unlimited, pregnant with the possibility of doubling, tripling or quadrupling your investment.




Lots of people/funds "bet the farm". Lots of them go broke. Of course you only hear about the minority successful ones. Just like gambling, majority lose but its the minority lucky ones that attention are paid to. If you want to treat investing as gambling and "bet the farm" on red or black, that's your decision, not a very smart one.



Rainman said:


> In this regard, I'm reminded of a remark made by Stanley Druckenmiller, *a guy who achieved a 30% annual return for 20 plus years.  *




Am I supposed to be impressed by this ? I can also grab the Market Wizard books and point out a few guys who use TA with much higher return pa.


----------



## pixel

Rainman said:


> Something that I'd like the dye-in-the-wool TA guys to reveal is just what their annual returns are over a 3, 5, 7 and 10 year period.




You just don't seem to get it:
*Why on Earth should I have to justify my choice of trading method* to you and others like you? 
You chose a different tack, as is your right in a free marketplace; it's no skin off my nose.
Should we ever meet in a trade on different sides, which is irrelevant in itself because ASX trading logs don't reveal individuals, these are the possible outcomes:

I buy shares off you and the share price goes up: Plus for me. You make less profit than you could've.
I buy shares off you and the share price goes down: Plus for you. I'll stop out containing my loss.
I sell shares to you and the share price goes up: Plus for you. I decide whether to buy back up or move on.
I sell shares to you and the share price goes down: Plus for me. You paid too much.
If, over time, either of us collects not enough Pluses and fails to adjust his style, does it say anything about the methodology he has chosen? Of course not! 

If you buy a hammer and keep smashing your thumb, by all means buy a nail gun. Just be aware that your being ham-fisted could cause you to shoot yourself in the foot. My publishing a statistic about how many nails I hammered straight into the right place won't make you any less ham-fisted. Nor will it prove whether the hammer or the nail gun is a better tool.


----------



## Rainman

minwa said:


> Let's do it. Post yours since you suggested it and I'll post mine.




Calm down, supertrader! First, it was not a suggestion to TA guys on my part.  It was an invitation.  Second, if you don't want to reveal what your own personal long term performance is, why don't you just give an indication of what sort of consistent annualised return you'd consider satisfactory over a 3, 5 or 10 year period? 



minwa said:


> Lots of people/funds "bet the farm". Lots of them go broke. Of course you only hear about the minority successful ones. Just like gambling, majority lose but its the minority lucky ones that attention are paid to. If you want to treat investing as gambling and "bet the farm" on red or black, that's your decision, not a very smart one.




I'll take it from that that you don't take "bet-the-farm" positions.  Which proves my point. 



minwa said:


> Am I supposed to be impressed by this ?




Yeah, right.  That was the whole the reason that I cited Druckenmiller: to impress you.


----------



## hamli

It's funny how everyone takes these discussions as personal attacks.

Be open minded, learn both TA and FA and use both/either, whatever works for you.


----------



## Rainman

pixel said:


> You just don't seem to get it:
> *Why on Earth should I have to justify my choice of trading method* to you and others like you?




I have no interest in you justifying your "_choice of trading method_" to me.  No interest whatsoever.  But that is not the issue.  The issue is the return that different investment styles produce.  

I would have thought that it is self-evident that the investment style that produces the consistently higher return over the long term is pretty convincing evidence that that style has an edge over the style that produces lower returns over the long term.  

If you don't agree that the name of the game is consistent market-beating returns over the long term, then you are on a different planet to me - amateur planet.


----------



## Rainman

hamli said:


> It's funny how everyone takes these discussions as personal attacks.
> 
> Be open minded, learn both TA and FA and use both/either, whatever works for you.




Yes, I noticed that.  Thin skin is the sign of the amateur.


----------



## Quant

Rainman said:


> Yes, I noticed that.  Thin skin is the sign of the amateur.




I would go one further ...  Those who regularly test the skin thickness of others are also exhibiting the sign of an amateur ...


Thanks for listening , i have nothing further to add on this subject   ;-)


----------



## hamli

It will be hard to compare returns. People perform fundamental analysis and technical analysis in different ways.
They look at different things.

So you can't take a few FA results and compare it against a few TA results. Not everyone approaches FA/TA the same way. And you would also then need to find 'purists' who completely ignore the other method.


----------



## Boggo

hamli said:


> It's funny how everyone takes these discussions as personal attacks.
> 
> Be open minded, learn both TA and FA and use both/either, whatever works for you.




I agree hamli.

I do get a bit wound up (in case nobody noticed  ) when I see comments and criticisms of TA by people who don't understand it.

In 17 years of trading/investing I have tried just about everything in existence. Fundamental worked for a while and I thought I had found my saviour until I started to see the lag, inaccuracies and flaws in the info I was dealing with.
Throw in a down market (approx 17% of the market life) and you can easily undo a years value in a couple of months.

Look at the investors who held TLS all the way down from around $9, all you heard was "it's a bargain at these prices" and "dividend yield is going up" which in itself highlights the fact that basic calculations are misunderstood.

I found that the entry into stocks often differed very little between TA and FA even though FA usually lagged quite a bit. The big difference was the protection of investment value, ie, when it starts to turn down then TA doesn't give back profits.

There are stocks that I have held for quite a while that may have sound FA, two of my longest holds, SYD for close to a year now and BAP since Feb '15 but I bought and monitor from a TA perspective.
Some might see this as investing, call it what you want but to me as long as they are creating value before I get an exit signal I will hold, TA in and TA out.

Quite often I get the usual, "if you had bought and held CBA" etc, sounds great, I might be holding the next CBA in one of my current holdings, TA will alert me if that is not the case.

Recently I had an investor mate say he was going to buy CBA because "at these prices" etc.
I pulled out my old excel spreadsheet from the days when FA was going to be my saviour, put in some rubbery figures and came up with a valuation of nearly $84 (that I wouldn't trust), he was happy as a pig in poop just on that news, seems to be all he needed !!!!

When people suddenly pop up and start canning TA then up goes the red flag, I think I have put in enough hard yards on both methods to 'highlight' that they have just decided to pick a side and they will apply the fruit bat approach to the other side, ie if you can't eat it then you just **** on it so no one else can eat it.
There is however an advantage in applying TA to fundamentally sound stocks though in most cases you are already holding before the FA theory kicks in and the fundies arrive to support your head start.

Anyway, after all that, tomorrow morning I am taking my wife to Europe and the the USA for a month, business class courtesy of TA 

Tootle pip kiddies


----------



## Value Hunter

Boggo if you have really made that much money from squiggly line voodoo then I tip my hat to you sir.


----------



## Newt

Hmm, I seem to recall discussions in the SMSF returns thread about the variety of methodologies for calculating return.  Comparing different methodologies for return (in an ideal world) I'd be keen to know:

- Average % return over >5years
- Time to learn and become profitable (I'm not interested in what the "Olympic" class traders can achieve, more interested in average Joe with a day job)
- Time/week to maintain methodology/trades
- % Drawdowns

Would it be reasonable to infer to FA traders are more likely to have a personal bias towards longer term position trades, rather than the cut and thrust of intraday/daily/weekly TA trading?  Getting a good methodology fit to personality is something I'm a strong believer in.


----------



## hamli

I don't see how it is possible to assign a 'return' on TA vs a 'return' on FA.

Some one in TA might use:
1. Bollinger bands
2. Candle sticks
3. Fibonacci Retracements
4. Market Profiles
5. % R indicator

Then some might trade:
1. Intra day
2. Short-time frame - weekly
3. Medium-term - months

And then, just because the candlestick person couldn't make it work, doesn't mean that TA is horrible. Or just because the bollinger band person had poor results, and skewed the results down, doesn't mean there aren't highly profitable methods out there.


Then the fundamental person:
1. Might only look at PE ratios across the sector
2. Others might compare one company against all their competitors strategy wise
3. Others might look at macro economics

Then some might:
1. Hold forever and never sell.
2. Hold and sell once target reached (which could be short-med term)
3. Cut losses on poor macroecomics, change in management or poor strategy.

Just because one FA person holds forever, doesn't mean that all FA people hold forever. Just like you can't assume that all TA would have signalled a buy prior every uptick and would have a triggered a sell prior every downtick.

So how do you compare TA results vs FA results in a fair way, without throwing out blanket assumptions?


----------



## pixel

Boggo said:


> I agree hamli.
> 
> I do get a bit wound up (in case nobody noticed  ) when I see comments and criticisms of TA by people who don't understand it.
> 
> In 17 years of trading/investing I have tried just about everything in existence. Fundamental worked for a while and I thought I had found my saviour until I started to see the lag, inaccuracies and flaws in the info I was dealing with.
> Throw in a down market (approx 17% of the market life) and you can easily undo a years value in a couple of months.
> 
> Look at the investors who held TLS all the way down from around $9, all you heard was "it's a bargain at these prices" and "dividend yield is going up" which in itself highlights the fact that basic calculations are misunderstood.
> 
> I found that the entry into stocks often differed very little between TA and FA even though FA usually lagged quite a bit. The big difference was the protection of investment value, ie, when it starts to turn down then TA doesn't give back profits.
> 
> There are stocks that I have held for quite a while that may have sound FA, two of my longest holds, SYD for close to a year now and BAP since Feb '15 but I bought and monitor from a TA perspective.
> Some might see this as investing, call it what you want but to me as long as they are creating value before I get an exit signal I will hold, TA in and TA out.
> 
> Quite often I get the usual, "if you had bought and held CBA" etc, sounds great, I might be holding the next CBA in one of my current holdings, TA will alert me if that is not the case.
> 
> Recently I had an investor mate say he was going to buy CBA because "at these prices" etc.
> I pulled out my old excel spreadsheet from the days when FA was going to be my saviour, put in some rubbery figures and came up with a valuation of nearly $84 (that I wouldn't trust), he was happy as a pig in poop just on that news, seems to be all he needed !!!!
> 
> When people suddenly pop up and start canning TA then up goes the red flag, I think I have put in enough hard yards on both methods to 'highlight' that they have just decided to pick a side and they will apply the fruit bat approach to the other side, ie if you can't eat it then you just **** on it so no one else can eat it.
> There is however an advantage in applying TA to fundamentally sound stocks though in most cases you are already holding before the FA theory kicks in and the fundies arrive to support your head start.
> 
> Anyway, after all that, tomorrow morning I am taking my wife to Europe and the the USA for a month, business class courtesy of TA
> 
> Tootle pip kiddies




Enjoy the trip, Boggo. 
You and your wife deserved it!

... oh, and come back happy and relaxed. We need people like you who can talk sense.


----------



## Rainman

hamli said:


> I don't see how it is possible to assign a 'return' on TA vs a 'return' on FA.




Are you serious?  

You look at the amount of equity that you have (whether you're a TA or an FA guy) at the beginning of the period under equiry and then you look at the amount of equity that you have at the end of the period - adding or subtracting from the return for the period any realised or unrealised gains or losses on positions still open at the end of the period.  

Is that so hard?


----------



## Boggo

pixel said:


> Enjoy the trip, Boggo.
> You and your wife deserved it!
> 
> ... oh, and come back happy and relaxed. We need people like you who can talk sense.




Cheers pixel


----------



## hamli

Rainman said:


> Are you serious?
> 
> You look at the amount of equity that you have (whether you're a TA or an FA guy) at the beginning of the period under equiry and then you look at the amount of equity that you have at the end of the period - adding or subtracting from the return for the period any realised or unrealised gains or losses on positions still open at the end of the period.
> 
> Is that so hard?




People conduct TA and FA in different ways.

You can't make a blanket assumption and assume a person using TA will have the same result as another person using TA. They have their own methods.

Same as FA. You can't assume one persons result is reflective of another

And what's to say that they are 'purists' and totally ignore the FA/TA.

How do you expect to control for these variables?


----------



## galumay

Ultimately it all comes down to what you are more comfortable with, there are also TA's that have made significant amounts of money over the long term, and obviously there are a notable bunch of FA's that have made immense fortunes from it - but neither will work if you dont have a personality that aligns with the strategy.

TA makes no logical sense to me, FA i can understand and it suits my personality, I have no wish to convince anyone else of anything - and thats the bit that gets on my goat - the evangalists on both sides of the debate who have some innate desire to convince others that the strategy and philiosophy towards investment they have adopted is superior.

To me that is simply a sign of insecurity.

At least we have a strategy, so many people go right through life with no strategy at all towards investment and if they do 'invest' some money it will be based on a hot tip from Bob at the pub on Friday night!


----------



## Rainman

hamli said:


> ... You can't make a blanket assumption and assume a person using TA will have the same result as another person using TA. They have their own methods.




Come on.  We are not trying to determine the number of angels sitting on a pinhead here.  

If you have two fund managers - one adopting an FA approach and the other adopting a TA approach - and you give them each the same amount of starting capital to manage over a 3, 5 or 10 year period, are you telling me that the percentage return that each manager is able to generate on that starting capital at the end of each period does not tell you which manager had the better performance?  



hamli said:


> ... And what's to say that they are 'purists' and totally ignore the FA/TA.




Boggo and tech/a seem pretty pure TA guys to me.


----------



## hamli

Rainman said:


> Come on.  We are not trying to determine the number of angels sitting on a pinhead here.
> 
> If you have two fund managers - one adopting an FA approach and the other adopting a TA approach - and you give them each the same amount of starting capital to manage over a 3, 5 or 10 year period, are you telling me that the percentage return that each manager is able to generate on that starting capital at the end of each period does not tell you which manager had the better performance?
> 
> 
> 
> Boggo and tech/a seem pretty pure TA guys to me.




It will tell me who the better/luckier manager at that point in time for the market condition was. It will tell me little about whether TA is better than FA.


----------



## Rainman

hamli said:


> It will tell me who the better/luckier manager at that point in time for the market condition was. It will tell me little about whether TA is better than FA.




Luck? 

Luck might explain a difference between two levels of performance across 1 year.  It might even explain a difference between two levels of performance across 2 years.  But if you are saying that it would explain a difference between two levels of performance across 5 years, let alone, 10 years, then you are deluding yourself.


----------



## hamli

Rainman said:


> Luck?
> 
> Luck might explain a difference between two levels of performance across 1 year.  It might even explain a difference between two levels of performance across 2 years.  But if you are saying that it would explain a difference between two levels of performance across 5 years, let alone, 10 years, then you are deluding yourself.




If that is all you got from it, then I rather talk to a rock.


----------



## Rainman

hamli said:


> If that is all you got from it, then I rather talk to a rock.




That's because you can't accept that where an investor across a 5 to 10 year period earns meaningfully higher returns than another investor having the same amount of capital to manage, that says nothing about the investment styles both adopt.  

That is a demonstrably foolish claim to make.


----------



## skyQuake

Anyhow, getting back on topic



Rainman said:


> Come on.  We are not trying to determine the number of angels sitting on a pinhead here.
> 
> If you have two fund managers - one adopting an FA approach and the other adopting a TA approach - and you give them each the same amount of starting capital to manage over a 3, 5 or 10 year period, are you telling me that the percentage return that each manager is able to generate on that starting capital at the end of each period does not tell you which manager had the better performance?
> 
> Boggo and tech/a seem pretty pure TA guys to me.




Except there's no figures out there to compare - technical funds don't exist because slippage kills it when trading any large sum of money. It also depends on how narrow you define TA. Bunch of futs trading shops (and individuals) making bank, and they're definitely not FA traders.

I'll use our very own Peter2's momentum book as an example. Its pure TA and he's done very well but that doesnt mean what he's doing now is possible with $100m under management.


----------



## hamli

Rainman said:


> That's because you can't accept that where an investor across a 5 to 10 year period earns meaningfully higher returns than another investor having the same amount of capital to manage, that says nothing about the investment styles both adopt.
> 
> That is a demonstrably foolish claim to make.




Yes, I said:
"It will tell me who the *better/luckier* manager at that point in time for the market condition was. It will tell me little about whether TA is better than FA."

But it's not my problem that you struggle to read.


----------



## VSntchr

skyQuake said:


> Anyhow, getting back on topic
> Except there's no figures out there to compare - technical funds don't exist because slippage kills it when trading any large sum of money. It also depends on how narrow you define TA. Bunch of futs trading shops (and individuals) making bank, and they're definitely not FA traders.



Great post. Brings some reality to the argument. This is also something that I _think_ Craft has spoken of in his journey through from TA to FA.



skyQuake said:


> I'll use our very own Peter2's momentum book as an example. Its pure TA and he's done very well but that doesnt mean what he's doing now is possible with $100m under management.



Do you have any estimate on what levels such a strategy may run into significant headwinds in terms of slippage?
I imagine that the effect is progressive and slowly eliminates more potential opportunities as your size outweighs your required liquidity. For a while the trader can potentially move to more thickly traded stocks without losing much in potential return as their focus can only manage a handful of positions anyway - thus the opportunity cost of foregone positions is low. But as size gets to a certain point, the tradeable universe is now so small that the strategy cannot find enough candidates to fill a portfolio, or at best - has a less preferential selection.


----------



## skyQuake

VSntchr said:


> Do you have any estimate on what levels such a strategy may run into significant headwinds in terms of slippage?
> I imagine that the effect is progressive and slowly eliminates more potential opportunities as your size outweighs your required liquidity. For a while the trader can potentially move to more thickly traded stocks without losing much in potential return as their focus can only manage a handful of positions anyway - thus the opportunity cost of foregone positions is low. But as size gets to a certain point, the tradeable universe is now so small that the strategy cannot find enough candidates to fill a portfolio, or at best - has a less preferential selection.




Peter2s looks a bit more robust in terms of liq than pav's orig micro cap port. A few hundred $k? Then the real liq problems being. You can still use the same strat on say asx 50, but those trades are gonna suck.
Probably have to look at the US market for better liq or trade more mean reversion strats.


----------



## Rainman

skyQuake said:


> ...  technical funds don't exist because slippage kills it when trading any large sum of money...




Well, you attribute the fact that there are no managers of large funds who are pure technical analysts to "_slippage_" - as if, were one to do away with the slippage, we'd suddenly see a proliferation of high-returning funds being managed by guys who base their investment decisions solely on technical analysis.

You don't suppose the fact that there are no pure TA managers of large funds might have something to do with the possibility that the returns of funds managed by guys who base their investment decisions solely on technical analysis are just not very good?


----------



## minwa

Rainman said:


> You don't suppose the fact that there are no pure TA managers of large funds might have something to do with the possibility that the returns of funds managed by guys who base their investment decisions solely on technical analysis are just not very good?




Anyone with internet can find the answer to that.


----------



## tech/a

skyQuake said:


> Anyhow, getting back on topic
> 
> 
> 
> Except there's no figures out there to compare - technical funds don't exist because slippage kills it when trading any large sum of money. It also depends on how narrow you define TA. Bunch of futs trading shops (and individuals) making bank, and they're definitely not FA traders.
> 
> I'll use our very own Peter2's momentum book as an example. Its pure TA and he's done very well but that doesnt mean what he's doing now is possible with $100m under management.




Well I'm not trading 100 million 
I'm not trying to be a billionair.

But there are a few here who actually know me and have met .
Not slumming it

Have a great trip BOGGO 
Must be a South Australian thing.

Off myself for 8 weeks on 12/7
Canada/Alaska/USA
once you've lied down long haul you'll never travel
Another way.

All analysis has it's place.
But few know how to be consistently profitable in either discipline.
I agree that the larger majority of technical traders have no idea 
How to turn a profit-----consistently.
What to look for and how to implement their analysis and
Most importantly if the strategy they implement will have any
Chance of being consistently profitable over the long term.


----------



## skyQuake

Rainman said:


> Well, you attribute the fact that there are no managers of large funds who are pure technical analysts to "_slippage_" - as if, were one to do away with the slippage, we'd suddenly see a proliferation of high-returning funds being managed by guys who base their investment decisions solely on technical analysis.
> 
> You don't suppose the fact that there are no pure TA managers of large funds might have something to do with the possibility that the returns of funds managed by guys who base their investment decisions solely on technical analysis are just not very good?




Have you traded breakouts on sub asx 300 stocks before?

To take an extreme example, everyday there are 5+ news alerts on stocks who merely hint at lithium exposure. 
If I was managing a mighty portfolio of $500 I could have made 1000%+ returns in the past few months.

Then there's also those TA guys that backtest instead of squiggly lines. They're called Quants and some of them run pretty darn successful funds. A few of them that I know have no idea how to read a financial statement

Also, found a study that compares pure FA funds to those that _use_ TA


> Based on a study of more than 10,000 actively managed equity and balanced funds, including about one-third of which employ technical analysis, the authors compared the investment performance of funds that use technical analysis versus those that do not using five metrics. They found that funds using technical analysis provided a meaningful advantage to their investors.



http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2202060

*So tell me again why you'd rather have 1 less trick in your toolbox?*


----------



## Quant

skyQuake said:


> Have you traded breakouts on sub asx 300 stocks before?
> 
> To take an extreme example, everyday there are 5+ news alerts on stocks who merely hint at lithium exposure.
> If I was managing a mighty portfolio of $500 I could have made 1000%+ returns in the past few months.
> 
> *Then there's also those TA guys that backtest instead of squiggly lines. They're called Quants and some of them run pretty darn successful funds. A few of them that I know have no idea how to read a financial statement*
> 
> Also, found a study that compares pure FA funds to those that _use_ TA
> 
> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2202060
> 
> *So tell me again why you'd rather have 1 less trick in your toolbox?*




Too be clear i am not on 1 team , when i traded stocks previously , i used BOTH methods successfully together and i believe anyone who doesnt is behind the curve . Now i am primarily in intraday trader FA is a moot point  ....  


http://etfhq.com/blog/2013/03/02/top-technical-analysts/


----------



## pixel

A quote by an old sage comes to mind:
 “Never attempt to teach a pig to sing; it wastes your time and annoys the pig.”
― Robert A. Heinlein, Time Enough for Love 

tech/a, you have certainly taught a lot of profitable lessons to a lot of members - this old tomcat included.
Those of us, who wanted to learn, did so and appreciate the effort you put into your work and the generosity with which it was freely given.

However, the www offers anonymity to all kinds of people with different agendas. Most of these crusaders are easy to identify by the number of repetitive replies where they insist on their opinion being the only truth and/or attack different views. They are best left to bask in their own ignorance and apathy, "don't know, don't care."


----------



## explod

tech/a said:


> Well I'm not trading 100 million
> I'm not trying to be a billionair.
> 
> But there are a few here who actually know me and have met .
> Not slumming it
> 
> Have a great trip BOGGO
> Must be a South Australian thing.
> 
> Off myself for 8 weeks on 12/7
> Canada/Alaska/USA
> once you've lied down long haul you'll never travel
> Another way.
> 
> All analysis has it's place.
> But few know how to be consistently profitable in either discipline.
> I agree that the larger majority of technical traders have no idea
> How to turn a profit-----consistently.
> What to look for and how to implement their analysis and
> Most importantly if the strategy they implement will have any
> Chance of being consistently profitable over the long term.




Well summed up Tech and have a good trip. 

Market anaysis for trading improves gradually with experience.   In the beginning following the ideas of those who are successful and learning principals of charting is the go.  

In the end,  in my view,  one develops an instinct for it.  Charting,  fundamentals,  but add on,  daily currency and market movements together with the product of the company followed and then we have sentiment.  When I log on of a morning a perusal of the news (not just financial)   gives me a good idea of where the action is going to be. 

Now how does one simply lay that out in terms for someone starting out to adopt.   You can't,  it requires time and EXPERIENCE


----------



## tech/a

pixel said:


> A quote by an old sage comes to mind:
> “Never attempt to teach a pig to sing; it wastes your time and annoys the pig.”
> ― Robert A. Heinlein, Time Enough for Love




Cheers

My old man never had an issue with pigs either
He was a butcher!


----------



## Rainman

Boggo said:


> tomorrow morning I am taking my wife to Europe and the the USA for a month, business class courtesy of TA






tech/a said:


> ... there are a few here who actually know me and have met .
> Not slumming it... Off myself for 8 weeks on 12/7
> Canada/Alaska/USA
> once you've lied down long haul you'll never travel
> Another way.
> .




You two sound like a couple of gangsta rappers from the projects who have just scored their first record deal.


----------



## Rainman

minwa said:


> Anyone with internet can find the answer to that.




Well, it should be easy for you then.  And yet you haven't done it.


----------



## Rainman

skyQuake said:


> ... If I was managing a mighty portfolio of $500 I could have made 1000%+ returns in the past few months.




Coulda, woulda, shoulda...  It's an old story.


----------



## Rainman

skyQuake said:


> ... Also, found a study that compares pure FA funds to those that _use_ TA
> 
> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2202060




Did you read the paper that you provide the link to above?  If so, where in the paper did you get the notion that the study compares "_pure FA funds to those that use TA_"?

There is no such comparison.   The hypothesis that the authors set out to prove in the paper is that "_Technical Analysis confers a risk-adjusted performance advantage to funds which use it more intensely_".  

But the "_performance advantage_" that the authors refer to is that in relation to established market indices or benchmarks.  It is not against the performance of a representative pool of FA fund managers.


----------



## Rainman

skyQuake said:


> Also, found a study that compares pure FA funds to those that _use_ TA
> 
> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2202060




After wading further through the pompous verbosity of the paper that you've linked to, the only conclusion that it seems to make directly in relation to FA funds is this on page 20:

"_A comparison of the results in Panels A and B reveals that [TA] managers are much better able to beat their benchmarks when the market declines than when it is rising. When the benchmark return is positive, [TA] portfolio managers find it comparatively difficult to keep pace. One possible reason for the enhanced outperformance in negative months is that [TA] managers can increase cash holdings and thus buoy net returns. Even so, both the technical analysis user and nonuser beat the market index. Panel B of Table 8 contains the lone statistically significant result for average performance. On the basis of BAR, managers who consider technical analysis to be very important outperform those who do not use it by an average of 19 basis points per month, which is different from zero at the 5% significance level. Although this result is not confirmed by a nonparametric difference-of-medians test, there is directional consistency. Thus, the data provide some evidence that technical analysis conveys an advantage when market prices decline_".

In other words, TA managers, if they outperform FA managers at all, do so only in down markets and do so only as a result of increasing their cash holdings and keeping the returns that they may have already made.  

That is a pretty weak endorsement of the superiority of TA over FA.


----------



## luutzu

Rainman said:


> After wading further through the pompous verbosity of the paper that you've linked to, the only conclusion that it seems to make directly in relation to FA funds is this on page 20:
> 
> "_A comparison of the results in Panels A and B reveals that [TA] managers are much better able to beat their benchmarks when the market declines than when it is rising. When the benchmark return is positive, [TA] portfolio managers find it comparatively difficult to keep pace. One possible reason for the enhanced outperformance in negative months is that [TA] managers can increase cash holdings and thus buoy net returns. Even so, both the technical analysis user and nonuser beat the market index. Panel B of Table 8 contains the lone statistically significant result for average performance. On the basis of BAR, managers who consider technical analysis to be very important outperform those who do not use it by an average of 19 basis points per month, which is different from zero at the 5% significance level. Although this result is not confirmed by a nonparametric difference-of-medians test, there is directional consistency. Thus, the data provide some evidence that technical analysis conveys an advantage when market prices decline_".
> 
> In other words, TA managers, if they outperform FA managers at all, do so only in down markets and do so only as a result of increasing their cash holdings and keeping the returns that they may have already made.
> 
> That is a pretty weak endorsement of the superiority of TA over FA.




On average, FA managers couldn't beat any major Index. So much for them using FA.

An investor could make just as much money with FA managers as simply buying an index. And they won't have to the pleasure of paying those fees and stationeries.


----------



## skyQuake

Rainman said:


> Coulda, woulda, shoulda...  It's an old story.




You missed the point - its in relation to slippage and liquidity. Made a motza on PLS GXY etc but the small 0.5c lith names? Can't touch them...



Rainman said:


> Did you read the paper that you provide the link to above?  If so, where in the paper did you get the notion that the study compares "_pure FA funds to those that use TA_"?
> 
> There is no such comparison.   The hypothesis that the authors set out to prove in the paper is that "_Technical Analysis confers a risk-adjusted performance advantage to funds which use it more intensely_".
> 
> But the "_performance advantage_" that the authors refer to is that in relation to established market indices or benchmarks.  It is not against the performance of a representative pool of FA fund managers.




What??



> The contrast appears more salient during down markets, *and* when performance is measured
> relative to a primary benchmark.




Also, did you even look at the comparison graphs?


----------



## Rainman

luutzu said:


> On average, FA managers couldn't beat any major Index. So much for them using FA.
> 
> An investor could make just as much money with FA managers as simply buying an index. And they won't have to the pleasure of paying those fees and stationeries.




This is true.  But if the study undertaken by the authors of this paper is anything to go by, the position for TA managers is worse.


----------



## Rainman

skyQuake said:


> Also, did you even look at the comparison graphs?




Unlike you, I have read the whole paper. 

You cite this sentence: "_The contrast appears more salient during down markets, and when performance is measured relative to a primary benchmark_".

But this is precisely the issue.  The paper found that TA funds only outperformed FA funds during down markets and only as a result of going to cash and reducing market exposure.  When "_the benchmark return is positive, [TA] portfolio managers find it comparatively difficult to keep pace.._.": [p.20].    

Where in any of this do you find support for your contention that TA funds consistently outperform FA funds?


----------



## skyQuake

Rainman said:


> Unlike you, I have read the whole paper.
> 
> You cite this sentence: "_The contrast appears more salient during down markets, and when performance is measured relative to a primary benchmark_".
> 
> But this is precisely the issue.  The paper found that TA funds only outperformed FA funds during down markets and only as a result of going to cash and reducing market exposure.  When "_the benchmark return is positive, [TA] portfolio managers find it comparatively difficult to keep pace.._.": [p.20].
> 
> Where in any of this do you find support for your contention that TA funds consistently outperform FA funds?




The whole paper? Or just the bits you like ?


----------



## cynic

Rainman said:


> Unlike you, I have read the whole paper.
> 
> You cite this sentence: "_The contrast appears more salient during down markets, and when performance is measured relative to a primary benchmark_".
> 
> But this is precisely the issue.  The paper found that TA funds only outperformed FA funds during down markets and only as a result of going to cash and reducing market exposure.  When "_the benchmark return is positive, [TA] portfolio managers find it comparatively difficult to keep pace.._.": [p.20].
> 
> Where in any of this do you find support for your contention that TA funds consistently outperform FA funds?




Are you suggesting that the entire paper and its abstract are somehow misaligned?


----------



## Rainman

skyQuake said:


> The whole paper? Or just the bits you like ?
> 
> View attachment 66991




That graph is not showing in the version that I get when I click on your link and go to the PDF.  

But the fact remains that that graph which is Figure 1 follows on from the paragraph that I cited earlier from page 20.  Thus, what that graph is showing is the performance of TA funds during down markets versus FA funds.  

This is clear when you read the sentence that precedes Figure 1.  It says: "_Thus, the data provide some evidence that technical analysis conveys an advantage when market prices decline_".  Figure 1 then follows.  

I don't understand the authors to be saying that Figure 1 shows TA fund performance during periods when the benchmarks turn up.  Otherwise their claim on page 20 that when "_the benchmark return is positive,_ [TA] _portfolio managers find it comparatively difficult to keep pace.._," would make no sense.


----------



## Trendnomics

These type of threads (i.e. TA vs FA or This-Method vs That-Method) always transpires into people trying to convince other people, that their applied trading approach is superior. 

If these attempts at conversion were successful on a large scale, then the market would become more neutral (less winners + less losers). Hence, your success at converting people to your trading approach, is inversely correlated to the long term success of your trading approach. So why bother with your zealous conversion attempts? Perhaps a lack of confidence in your own trading approach?

Everyone please keep applying your own individual trading approaches - I'm happy with the current state of things, as my trading approach (TA only), has delivered a large six figure sum in profits over the past three years.


----------



## cynic

Rainman said:


> That graph is not showing in the version that I get when I click on your link and go to the PDF.
> 
> But the fact remains that that graph which is Figure 1 follows on from the paragraph that I cited earlier from page 20.  Thus, what that graph is showing is the performance of TA funds during down markets versus FA funds.
> 
> This is clear when you read the sentence that precedes Figure 1.  It says: "_Thus, the data provide some evidence that technical analysis conveys an advantage when market prices decline_".  Figure 1 then follows.
> 
> I don't understand the authors to be saying that Figure 1 shows TA fund performance during periods when the benchmarks turn up.  Otherwise their claim on page 20 that when "_the benchmark return is positive,_ [TA] _portfolio managers find it comparatively difficult to keep pace.._," would make no sense.




Have you read the abstract yet?


----------



## cynic

Trendnomics said:


> These type of threads (i.e. TA vs FA or This-Method vs That-Method) always transpires into people trying to convince other people, that their applied trading approach is superior.
> 
> If these attempts at conversion were successful on a large scale, then the market would become more neutral (less winners + less losers). Hence, your success at converting people to your trading approach, is inversely correlated to the long term success of your trading approach. So why bother with your zealous conversion attempts? Perhaps a lack of confidence in your own trading approach?
> 
> Everyone please keep applying your own individual trading approaches - I'm happy with the current state of things, as my trading approach (TA only), has delivered a large six figure sum in profits over the past three years.




Six figures in three years! Why so long?!You must be doing it wrong! Get with the fundamentals why dontcha!


----------



## Rainman

cynic said:


> Are you suggesting that the entire paper and its abstract are somehow misaligned?




Well, the last sentence of the abstract says this:

"_The most remarkable finding is that portfolios with greater reliance on technical analysis have elevated skewness and kurtosis levels relative to portfolios that do not use technical analysis. Funds using technical analysis appear to have provided a meaningful advantage to their investors, albeit in an unexpected way_".

If I have understood the findings in the paper correctly, the reference to the "_unexpected way_" in which TA funds have provided a "_meaningful advantage_" is during down markets.  

A final point: the fact that the findings supporting this "_meaningful advantage_" demonstrated "_elevated skewness and kurtosis_" means that even the outperformance of TA funds during down markets is confined to an extremely limited number of TA funds.  

In other words, the outperformance of TA funds during down markets was the exception, not the rule.


----------



## Rainman

Trendnomics said:


> I'm happy with the current state of things, as my trading approach (TA only), has delivered a large six figure sum in profits over the past three years.




What was the amount of your starting equity and what were your annual percentage returns for each of those 3 years?


----------



## cynic

Rainman said:


> Well, the last sentence of the abstract says this:
> 
> "_The most remarkable finding is that portfolios with greater reliance on technical analysis have elevated skewness and kurtosis levels relative to portfolios that do not use technical analysis. Funds using technical analysis appear to have provided a meaningful advantage to their investors, albeit in an unexpected way_".
> 
> If I have understood the findings in the paper correctly, the reference to the "_unexpected way_" in which TA funds have provided a "_meaningful advantage_" is during down markets.
> 
> A final point: the fact that the findings supporting this "_meaningful advantage_" demonstrated "_elevated skewness and kurtosis_" means that even the outperformance of TA funds during down markets is confined to an extremely limited number of TA funds.
> 
> In other words, the outperformance of TA funds during down markets was the exception, not the rule.




So which rule, exactly, was it an exception to?


----------



## Rainman

skyQuake said:


> Also, found a study that compares pure FA funds to those that _use_ TA
> 
> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2202060




Something else that is interesting in this paper is the suggestion (and a suggestion is all that it is) that TA funds took greater risks than FA funds to achieve their outperformance during down markets.  Thus, on page 21 the authors note that:

"_Given the general finding of a higher performance standard deviation for portfolios associated with technical analysis, a question arises about whether the managers take on risk to a level that produces a higher failure risk for the fund. This is not easy to test directly because PSN does not provide a time series of its survey results, so as to link a past usage of technical analysis to subsequent performance... What PSN supplies is a record of whether a portfolio is active in its database or inactive. In our sample, 55% of portfolios for which managers state that technical analysis is not utilized have survived to the present. Portfolios associated with the other four possible responses have survived at a 45-48% rate, with the “technical analysis is very important” category at the top of that range_". 

So while FA funds have survived at a rate of 55%, TA funds have only survived at a rate of between 47% and 48%.  Given that we are talking here about the difference between living on to make money and being completely wiped out, this is a significant difference.


----------



## Rainman

cynic said:


> So which rule, exactly, was it an exception to?




Read the paper.  The rule was that most TA managers did not outperform even during down markets.  This is evidenced by the "_elevated skewness and kurtosis_" of the statistical findings.  Those TA managers that did were the exception.


----------



## Trendnomics

Rainman said:


> What was the amount of your starting equity and what were your annual percentage returns for each of those 3 years?




I'd prefer not to divulge my exact account sizes - all I can say is that my total profits are well in the six figures.

My return over the past 3 years is ~+50% (~+15% pa) - all trades executed on the ASX.

For more information on my trade approach, please see my thread:

https://www.aussiestockforums.com/forums/showthread.php?t=30641

But please don't convert to my trading approach.


----------



## Rainman

Trendnomics said:


> I'd prefer not to divulge my exact account sizes - all I can say is that my total profits are well in the six figures.
> 
> My return over the past 3 years is ~+50% (~+15% pa) - all trades executed on the ASX.
> 
> For more information on my trade approach, please see my thread:
> 
> https://www.aussiestockforums.com/forums/showthread.php?t=30641
> 
> But please don't convert to my trading approach.




So you have managed an annualised 15% return on your equity?  That's a decent return.  But I know a number of Benjamin Graham style net-net investors who have more than doubled that return on an annualised basis for a longer period: http://www.netnethunter.com/hunter-fund/.  

And the net-net approach is one of the simplest quantitative approaches that I know of and which innumerable studies have shown deliver gains of 20% plus annualised: http://www.valuewalk.com/2015/02/ben-graham-net-nets-2/


----------



## cynic

Rainman said:


> Read the paper.  The rule was that most TA managers did not outperform even during down markets.  This is evidenced by the "_elevated skewness and kurtosis_" of the statistical findings.  Those TA managers that did were the exception.



I read the abstract which is purportedly a summation of the findings of the entire paper! Are you saying that the abstract is wrong?

And if this purported rule of TA manager underperformance is true, then how did the graphs and the abstract end up reporting otherwise?

It sounds like you're discounting TA manger outperformance because they broke a rule (of your own invention) stating TA must always underperform!


----------



## Rainman

cynic said:


> I read the abstract which is purportedly a summation of the findings of the entire paper! Are you saying that the abstract is wrong?
> 
> And if this purported rule of TA manager underperformance is true, then how did the graphs and the abstract end up reporting otherwise?
> 
> It sounds like you're discounting TA manger outperformance because they broke a rule (of your own invention) stating TA must always underperform!




Do you seriously expect me to enter a discussion with you about this paper when all you have done is read the abstract?  Is that how you got through school - by reading summaries of books and articles?  

I have quoted entire paragraphs from the paper in my posts above whereas you want to rely exclusively on the abstract.  I give you an E for Effort.

When I read a post like yours which proposes (apparently in all seriousness) to pit your understanding of the 100 or so words in the abstract with the 36 pages of the entire paper which you haven't bothered even to read, it really is the dawn of amateur hour.


----------



## Value Hunter

I have not read the paper but are we discussing gross returns, net pre-tax returns or net after tax returns? Because ill bet you if its net *after tax* returns a 2-3% p.a. advantage to technical funds which on average trade more will quickly be eaten up in brokerage, slippage and most importantly *taxes*


----------



## cynic

Rainman said:


> Do you seriously expect me to enter a discussion with you about this paper when all you have done is read the abstract?  Is that how you got through school - by reading summaries of books and articles?
> 
> I have quoted entire paragraphs from the paper in my posts above whereas you want to rely exclusively on the abstract.  I give you an E for Effort.
> 
> When I read a post like yours which pits your understanding of the 100 or so words in the abstract with the 36 pages of the entire paper which you haven't bothered even to read, it really is the height of amateur hour.




Anyone can cherry pick sections to quote out of context in support of one's personal ideology. 


Rather than me wading through 36 pages, how about you, as somebody who claims to have already done so, answer a direct question, namely:

Are you saying that the abstract is somehow variant to the findings of the paper it summarises?


----------



## Rainman

cynic said:


> ... Rather than me wading through 36 pages, how about you, as somebody who claims to have already done so, answer a direct question, namely...




Right, don't put in the effort to learn something that may be of enormous benefit to you.  That sounds too much like hard work.  Piggy-back off the work of others and accuse them from your total ignorance of the contents of the paper of cherry-picking.

Amateur hour.


----------



## cynic

Rainman said:


> Right, don't put in the effort to learn something that may be of enormous benefit to you.  That sounds too much like hard work.  Piggy-back off the work of others and accuse them from your total ignorance of the contents of the paper of cherry-picking.
> 
> Amateur hour.




Yet more deflective criticism!

Well sometimes the truth is uncomfortable, but that doesn't entitle one continually evade it!

So, when may I expect an answer to the question? Is the abstract a reasonable summation?


----------



## Rainman

cynic said:


> So, when may I expect an answer to the question?




When you read the entire paper for yourself.  Is that too much to ask of a TA guy about a comprehensive and scholarly paper dealing with technical analysis?

In passing, I must say that I find it extraordinary that you, who claim to follow technical analysis, are so unwilling to want understand your trading discipline a little bit better.  This paper is the most thorough study into the performance of TA funds that I know of - and you have zero interest in reading it. 

It is as if you were a member of the flat earth society being asked to read a report about how the earth was round.


----------



## cynic

Rainman said:


> When you read the entire paper for yourself.  Is that too much to ask of TA guy about a comprehensive and scholarly paper dealing with technical analysis?




Is that the best excuse you can come up with for your repetitious avoidance of a direct question for which a simple "yes","no" or "I don't know" would suffice?


----------



## Rainman

cynic said:


> Is that the best excuse you can come up with for your repetitious avoidance of a direct question for which a simple "yes","no" or "I don't know" would suffice?




Right, I am avoiding a question about a paper that you haven't even read. 

That you can't see the absurdity of this situation is disturbing.


----------



## cynic

Rainman said:


> ...
> In passing, I must say that I find it extraordinary that you, who claim to follow technical analysis, are so unwilling to want understand your trading discipline a little bit better.  This paper is the most thorough study into the performance of TA funds that I know of - and you have zero interest in reading it.



I've read the abstract!

Again I ask, is it not a fair summation of the entire paper?



> ...
> It is as if you were a member of the flat earth society being asked to read a report about how the earth was round.



Unless the abstract is in opposition to the body of the report, then the only person this analogy applies to within this dialogue is yourself!

Edit: I forgot to mention that my trading methods do not currently meet the popular definition of "technical analysis" and I cannot recall ever having claimed otherwise.


----------



## ryan11

Fundamental analysis is an approach in which one calculates the value on the basis of economic reports(Revenue, consumption, GDP , interest rate etc) and statistics. On the other hand Technical analysis investments are evaluated on the basis of charts , trends and trading volumes over the time. But when comes the point of comparison, Time Horizon and type of Trader plays an important role. Fundamental analysis is used by long term traders for holding position  days, weeks or even months whereas technical analysis is short-term methodology used to take position for days, minutes or even seconds.  
*The Best Approach of investing is combination of both Fundamental and Technical analysis.
*


----------



## Darc Knight

ryan11 said:


> *The Best Approach of investing is combination of both Fundamental and Technical analysis.*




This is what I assumed, but I guess people use each approach to varying degrees.


----------



## dutchie

Interesting video.  Does big money use fundamental analysis or not?

The Secret that Top Traders DON'T Want You to Know


----------

