# Fundamental Analysis vs. Technical Analysis vs. Any other form of Analysis



## tech/a (1 February 2011)

There is quite a muted debate going on over in the PEN thread.

So qualified Fundies over there who have a strong view.
Having Traded 17 yrs as a techie we see small debates rage infinitum.

So I invite all and any who can debate 

*WITHOUT PERSONAL ATTACK*

The topic here.

(Joe any chance of taking the Debate from PEN over to here?)


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## motorway (1 February 2011)

*Re: Fundamental Analysis V Technical Analysis V Any other form of Analysis --OPEN DEB*

http://www.zyen.com/PDF/Perceptions.pdf

Really good paper

He gives four scenarios which are maybe the equivalent of

 TA
 FA
TA + FA
One is with perfect FA
one other interesting one



> The point here is that the  system and the person, even with very good
> foreknowledge, can’t really improve on basic feedback, in fact they can make it worse by
> knowing when they cannot use that knowledge  to cooperate.




OK

What's wrong with Fundamentals ?



> Traditionally, economic models have assumed that markets have an equilibrium price level, where prices match fundamentals and forces of demand and supply are in balance.
> 
> Increasingly, economists are becoming aware that there is no such thing as a fundamental price and that there is a need to find a substitute for the role of fundamental price, which is a kind of anchor, where market prices are expected to gravitate towards.




Dynamic Equilibrium..

price "Hunts" ( another word for Oscillates )  ..



What drives Supply and Demand ?

Perceptions !



> financial markets incorporate people’s perceptions. Mark Twain puts these words in Huckleberry Finn’s mouth, “Hain’t we got all the fools in town on our side? And hain’t that a big enough majority in any town.” Many people’s perceptions matter to markets – and that leads to 10,000 Fat-Tailed Maniacs deciding the fates of most financial markets.






So what is the best way to measure perceptions ?

Ideally you need objective facts.
You measure their behavior and the change of their behavior.

FA may well be a useful form of analysis but it does not qualify.

FA  will not move the shareprice or it might only to the extent it is an important driver of enough people's perceptions.

And do these people tell us their perceptions
so that we know that everyone knows this is worth a $100 ?

So we should buy at .10 cents 

Markets Misbehave because Perceptions of Future Perceptions create actions today.
When maybe  the only thing that is real is what *is *happening today..

Motorway


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## luke256 (1 February 2011)

*Re: Fundamental Analysis V Technical Analysis V Any other form of Analysis --OPEN DEB*

Fundamental Analysis maybe good for long term investing but i doubt it has much benefit for the short term trader. 

By the time the fundamental info has been made public it is usually already factored into the share price. There is usually someone who knows what is going to be annouced before hand (and willing to trade it) and the t/a analysis of charts can show this. 

You can plot price movements and volume on a chart and see what is happening to the share price clearly. You can see how much is being bought/sold before major announcements and learn the patterns for future use.


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## luke256 (1 February 2011)

*Re: Fundamental Analysis V Technical Analysis V Any other form of Analysis --OPEN DEB*

Also
FA vs TA vs an other forms of analysis.

There is only FA and TA.

Other forms of analysis = gambling (no analysis) i.e flip a coin or guess


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## Wysiwyg (1 February 2011)

*Re: Fundamental Analysis V Technical Analysis V Any other form of Analysis --OPEN DEB*



motorway said:


> Markets Misbehave because Perceptions of Future Perceptions create actions today.
> When maybe  the only thing that is real is what *is *happening today..
> 
> Motorway



I don't understand. 

So data preceding "what is happening today" has no benefit with regard to for example the phenomenon of trend or the phenomenon of repetition? Is it all 50/50 ... really?


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## skyQuake (1 February 2011)

*Re: Fundamental Analysis V Technical Analysis V Any other form of Analysis --OPEN DEB*



luke256 said:


> Also
> FA vs TA vs an other forms of analysis.
> 
> There is only FA and TA.
> ...




Left out arbitrage and heuristics (which i suppose is more like statistics than technicals)


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## motorway (1 February 2011)

*Re: Fundamental Analysis V Technical Analysis V Any other form of Analysis --OPEN DEB*



Wysiwyg said:


> I don't understand.
> 
> So data preceding "what is happening today" has no benefit with regard to for example the phenomenon of trend or the phenomenon of repetition? Is it all 50/50 ... really?




Well do some reading and study 

The direct quote is about  today in relation to  perceptions of future perceptions.

Your question is a silly one.

Did you read the paper ?
of course you only know eg  if today is going up
By reference to the where from.

But how do you know something is going up based on what your perception of the future is ?  

If you did not read the paper 
why are we talking ?
If you did . read it again..

Because you did not understand it.

What matters is what is happening today
Does yesterday ?
Are You trying to  tell me you buy and sell stocks x days ago ?
I do not believe you ! But if you do yesterday benefits you and greatly.

However that does not stop anyone referencing the past to get some bearings.
So I do not understand YOUR points


* Dynamic Equilibrium. *  Is a about trend is about support resistance is about how price is fluctuating and how that is changing..

The where from is a key input of course
But history is History and a Population of interest surging can blow away past structure..

Eg Resistance is met or not.. what ever the historic chart may suggest as levels to look at.

*The action NOW  is always the most important
*

This is the Dynamic in Dynamic,,

FA is slippery
TA is Slippery
and for  the same reasons

Only the current action can really reveal much of use. ( and no crystal balls..)

The historic chart is maybe less useful than many think ? 

Motorway


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## luke256 (1 February 2011)

*Re: Fundamental Analysis V Technical Analysis V Any other form of Analysis --OPEN DEB*



motorway said:


> But how do you know something is going up based on what your perception of the future is ?




Perception of the future (based on technical trading signals to buy or sell) can be tested and expressed as % success rate after applying technical analysis to past data. You don't know if it will go up for certain but you can tilt the odds of a making a profit in your favour with FA or TA.

The paper was quite boring and wasted 10 minutes of my life.


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## motorway (1 February 2011)

*Re: Fundamental Analysis V Technical Analysis V Any other form of Analysis --OPEN DEB*

http://www.olsenblog.com/2009/10/scaling-laws-as-powerful-tools-of-economics/

Here is Some good info. Some will dismiss , Some will be interested.
Thats fine 

But here are the building blocks of how to measure and what to measure..



> The scaling law is a metric to determine, how far the market has diverged from its equilibrium.




So very different from looking at a historic chart and noting
support resistance etc or many other things..

It is measuring what is happening NOW to reveal if==>

Price is moving away from Equilibrium or to Equilibrium.

It is about Dynamic Support Resistance.. Which is always being met in the moment.
The NOW.

What does the action NOW reveal ! Is the question.

Motorway


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## motorway (1 February 2011)

*Re: Fundamental Analysis V Technical Analysis V Any other form of Analysis --OPEN DEB*



luke256 said:


> Perception of the future (based on technical trading signals to buy or sell) can be tested and expressed as % success rate after applying technical analysis to past data. You don't know if it will go up for certain but you can tilt the odds of a making a profit in your favour with FA or TA.
> 
> The paper was quite boring and wasted 10 minutes of my life.




Fine thanks for the feedback.
What is the TA you do that takes perception of the future into account ?
The trading Signals ? I mean in general .
Surely your TA can only use data up to the present moment
even if you use projections etc

A perception of the Future 
is because X is going to happen I will do Y now.
Even if there is no sign of X happening at the moment
Like in the first little story in the paper.

What sort of  X is your input ? in your TA just in a  general sense

Something like Gann ? or EW

Motorway


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## Wysiwyg (1 February 2011)

*Re: Fundamental Analysis V Technical Analysis V Any other form of Analysis --OPEN DEB*



motorway said:


> If you did not read the paper
> why are we talking ?
> If you did . read it again..
> 
> Because you did not understand it.



Well converting this opinion, theory and fact into practicality may take some further thought. I am a simple man.


> Only the current action can really reveal much of use. ( and no crystal balls..)
> 
> The historic chart is maybe less useful than many think ?
> 
> Motorway




Motorway you portray knowing yet no application. Do you yourself practically trade using past perception or forward perception? After all, there are two simplicities that take place after perception ...

1) Open
2) Close  

Maybe knowledge leads to second guessing the next move!


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## luke256 (1 February 2011)

*Re: Fundamental Analysis V Technical Analysis V Any other form of Analysis --OPEN DEB*

Motorway I think you are too hooked into the theory. Being practical is what makes the money.

Obviously I can only run signals over data after the event occurs. But the technical signals will show me the trend to that point of time and provide an entry signal with x% chance of success. 

With TA, I can say based on a technical signal there is a x% chance the market will be up tomorrow. Thats enough for me to trade or not trade off. 


> Something like Gann ? or EW




The olsenblog link posted above has Gann type techniques in it. Is this something you use in trading?


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## motorway (1 February 2011)

*Re: Fundamental Analysis V Technical Analysis V Any other form of Analysis --OPEN DEB*



Wysiwyg said:


> Well converting this opinion, theory and fact into practicality may take some further thought. I am a simple man.
> 
> 
> Motorway you portray knowing yet no application. Do you yourself practically trade using past perception or forward perception? After all, there are two simplicities that take place after perception ...
> ...




Wysiwg

The point of the paper ( and what I found interesting in it... And I happened to have dug it out today, first  read it a few years back )

That using feedback will often be the best course to take.
And most likely ( when it comes to things like Markets ) the most profitable.
That by keeping and adjusting to what is happening ( scale comes into this you operate on a scale that meets your needs ) You will arrive in the future fine .

Ok in your example you have a Bar with a range & volume and that bar has a position in relation to the others.. So what will you do with it .

Use it as feedback ?

Or do you do something else ?

My application is informed by Wyckoff
He would say you use the study of responses to reveal the technical postion

Same thing Richard Olsen says.

Both are talking about a dynamic form of analysis
That is objective..

X a Behavior ==ahh ===> Change of Behavior == I better consider doing  Y

feed back

Wyckoff is too big a topic for this thread 

But how do you measure behavior and COB ?
By looking at the historic chart ? Well yes but what about the way the "Tape" is clattering right NOW ?

By making projections into the future ?
FA or TA you need good objective metrics that
reveal facts about behavior imo
useful facts
If Value is Slippery
and some TA is too
you need to seek a different compass maybe 

Motorway


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## motorway (1 February 2011)

*Re: Fundamental Analysis V Technical Analysis V Any other form of Analysis --OPEN DEB*



luke256 said:


> Motorway I think you are too hooked into the theory. Being practical is what makes the money.
> 
> Obviously I can only run signals over data after the event occurs. But the technical signals will show me the trend to that point of time and provide an entry signal with x% chance of success.
> 
> ...




It does ?

I would be interested in what way ( There are many Gann's I suppose the tape reading one the swing trader etc which one  ?

This sums up Olsen's Work from that link




> How can we leverage these scaling laws for model building?
> Scaling laws are efficient at condensing a lot of data, they are computed as follows: for every x quantity, we observe quantity y and then average y. The scaling law tells us, how average y changes with x.






> Scaling laws have an important role as a yardstick for measurements and more importantly carry a significant message for the design of economic and financial models.
> 
> Traditionally, economic models have assumed that markets have an equilibrium price level, where prices match fundamentals and forces of demand and supply are in balance.
> 
> ...




He is  defining Equilibrium in a Dynamic Way
By how far the current action is from the Average as defined by the Scaling LAWS
Which he finds operate at all scales.

This washes away most theories

you are back to tape reading

measuring behavior and watching out for how it changes.

Most TA is complicated by overlays  on the action itself.

It depends what you are used to maybe..

But the price moves X amount
did it move faster / slower / Further etc
Than when it moved X amount before ?
and compared to X amount on average ?

Here is where you start.. Most people then go on to complicate it  

No I have found it tends to be always best to start with good practical use of a tool. With some basic guidance..

Theory will then help inform and widen ones  options ..

Things can sound complicated when they aren't in practice.

Olsen is just measuring  behavior
He uses the analogy of the Richter Scale. It just measures..

Maybe you mean he measures "Vibrations"
as in price fluctuations ? Well he does but nothing like Gann  ( completely different in Theory and practice . Gann completely misunderstood something very important imo ) 

Motorway


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## tech/a (1 February 2011)

*Re: Fundamental Analysis v Technical Analysis v Any other form of Analysis - OPEN DEB*

I see things have started WITHOUT our Fundamentalists.

A pity they may well learn something.

It was this post which I thought could bring about some discussion.
So I will present my view in the absence of our Fundamental warriors.

Click to expand---on the PEN thread







> fundamental analysis is the driver of a share price not lines on a chart.




Your or anyones analysis leads YOU to an opinion if that opinion is held by enough people then YOUR analysis will be vindicated. It could well be seen as incorrect by many---you wont know until sometime in the future. You also only have information which may or may not be accurate. Reports are out on a quarterly basis and could well change the current view as can announcements. Perception will see price alter.

Lines on a chart.
If your speaking Oscillators then I agree.
Price itself and Volume I dont. (Wyckoff)
Market Profile or Steidlmayer No again
P&F (Motorways specialty) No again



> T/A has it's place for both investors and traders, but T/A is an indicator only and is historical by it's very existence




Yes and No
Read in conjunction with the above
In experienced hands T/A can indeed pre empt future price moves---just as a Fundamentalist could claim that various reports could do the same.

The difference is F/A is a perception
T/A is in motion.



> I will stick to fundamental analysis as the basis of my investments. It takes a lot more effort than T/A, however it takes the guess work and emotion out of it based on sound information and facts




Fundamental analysis takes Months if not years to un fold--the eager waiting of the next announcement and today I even saw excitement and indeed comfort in a Sale in 1 lot of around 5 million in the stock PEN. (It seems those selling didn't have the same view). To say it takes out the guess work is crazy. If it did every valuation would be correct and every announcement would be reacted to in perfect harmony---truth is they Dont----often price is at a tangent prompting questions of *WHY* did price drop with such a great quarterly result" (As an example). 



> T/A is great for finding an entry point with a fundamentally sound stock, it is also useful to aid in identifying an exit point for a stock with failing fundamentals.




how can you be sure a stock is Fundamentally sound.
All those in HIH believed they were on a winner!
LHG another. If you know when a stock is fundamentally sound OR failing why would you want T/A?



> Yes I prefer to take the hard way and read wads of information and reap the benefits of doing so, including massive taxation benefits of LT investment.




Thats fine and all you need is one Poseidon and your set for life---so to your kids!
But techies can choose exactly the same and MORE.
We can take small chunks ---pay the tax and take Large chunks and pay less tax over time.
Takes me around 40 mins a day and I have no idea what the company does---I Dont care.
No worry about the next announcement or the X$ I have invested in Y.
I understand risk and Portfolio management something a large number of fundamental and technical traders DONT KNOW!


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## robusta (1 February 2011)

Ok Just got home 10 seconds from my FA point of view. 

PEN

No profit = loosing money NOW.

Book value $0.03 per share.

SP = $0.10

No need to look further - may be a trading opportunity and if that is your thing good luck. But as a investment my first rule is it has to *MAKE MONEY* not maybe/probably make money in the future. It has to *MAKE MONEY*


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## So_Cynical (1 February 2011)

My form of analysis works for me, i make money consistently and while i don't fully understand why i make money (beyond i sell my stocks to someone for more than i paid for it) i figure that's all that's really important.

i could care less what anybody else thinks and or does.


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## doctorj (1 February 2011)

I think the people below that have said something to the effect of 'Who cares?!' are correct. Both methods make money and if they work for you, then it's mission achieved.

One thing I am certain of is that technicals never permanently move markets. The deep pockets are with the institutions that base their decisions on fundamentals. Technical analysis is simply a set of methods for using market data to estimate the average opinion of market participants (including the fundamental folk).


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## Billyb (1 February 2011)

*Re: Fundamental Analysis v Technical Analysis v Any other form of Analysis - OPEN DEB*

Fundamental anlalysts:

-Purest form of stock analysis as you are purchasing the the business, not a chart
-Less risk, when used well
-can be fun for some people to study and understand businesses
-Less transaction costs in most cases
-Generally a more relaxed form of investment - it is time consuming initially but once you have bought the stock that you are comfortable with, you can sit back and just keep an eye on the stock/anouncements, thus allowing you to forget about your investments and enjoy life, with less stress.
-Greater predictablity of making a return, although returns may not be fabulous

but

-Less pool of stock to pick from
-cannot 'screen' through/filter as many stocks in a given time period compared to technical analysis - might miss opportunities
-Can't take advantage of speculation
-Very time consuming initially
-Requires more knowledge and experience than technical trading
-Very difficult to value a stock, with many different methods to do so

However, in the long term, I believe in fundamental analysis as Warren Buffett does.

I do believe that by accepting both approaches, returns can be maximised further, as some stocks are better taken advantage with one method or the other.


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## motorway (1 February 2011)

Interesting quote not from Ben Graham
But someone who thinks investors should keep an eye on technicals



> Ben Graham called the stock market a
> 
> “voting machine.”
> 
> To be a successful investor, you need to measure how the votes are being cast.





Why ? Maybe to make use of them. 


In the Long term Graham stated 







> The Stock Market acts like a weighing machine




So how does the Stock market get to the "right weight" surely only by way of the Votes.



> An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative




So Investment in this sense will be long term. Not to be confused with trading
and ignore the shorter speculative trends.. Even though there is uncertainty about whether a certain market move is just a ''Vote" or an accurate "Weighing"

An investor is ready under Graham's definition to continually buck the trend
and rely on his analysis..

Yet how certain are fundamentals ?
At the top of the last Bull Market How sound were Australian Bank Fundamentals.
Did the Banks look like good Buys ?

If so did anyone buy them all the way down and buck the trend do you think ?
Or were they obvious poor investments well before the down turn ?

Motorway


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## Market Depth (1 February 2011)

It's quite simple for me. TA allows me to create cashflow everyday, very important if you trade for a living. You need to know where the crowds are gathering. You can slice it and dice it however you like, but greed drives a share price up, and fear slaps it down. Either way I want in. 

FA needs patience and time. What you see may not be seen by all, at that moment in time. It's like a great game of chess. Sometimes you win, rather quickly. Sometimes you die a slow painful death, forced to average down a loss, and sometimes your holding onto a Stalemate for many years, whilst keeping the game of chess alive, by reading and number crunching to constantly validate your decision to play that particular game of chess. All OK if you have the funds to dedicate to the thrill of the chase.

Both methods work, and can make money, a combination of the two, if you have the capital, would be ideal IMHO.

Personally I like 'Instant Gratification' from very short term trading, but I also like my 'Long Hunting Trips' as well


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## operandi (2 February 2011)

Fundamental Analysis: amidst the quiet Mubarak looks like he might get lynched. Will he, wont he, if he will & what etc etc
Technical Analysis: Hmm those swing lows is perfect structure for where retail accounts are gonna get in, lets see the bonds? lets see who goes first!  
Other Form of Analaysis: Pre Open on Monday (& i dont mean the Asian session, your either looking at Europe or the US, we "kick in" after the Monday US close) : "hmm yes lets see the flow.. OMG selling, omg buying omg selling selling lets get short with these "dudes" in front of that structure and see what happens around that retail price point Oh its going, oh its not, oh it is" and so on and so forth

MBA speak term: 
Fundamanetal Analysis views a fundamental event as a catalyst for a revaluation of an asset because the event or lack thereoff creates a perceived alternate value and hence price. Price does not equal value
Technical Analysis attempts to find structural and technical  patterns based on previous action in an attempt to discern future price movements. 

The problem is there are too many variables in fundamental analysis to close a system and even if you do, force majeure still can play its hand so "shrug"
The problem with technical analysis is past price movements do not replicate future movements so we tweak money management to get the metrics suited to utility preference curve.

Profitable trading is the capital gain from the crystalisation of fundamental event that causes a technical pattern to emerge or vice versa. Fundamental and technical analysis are not mutually exclusive so the heading of this thread is lame.

Other form of analysis: Now this is the closest anyone can ever get to true edge and that is fleeting so you have to be super alert cause right around the corner some other trader is on the ready.


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## luke256 (2 February 2011)

*Re: Fundamental Analysis V Technical Analysis V Any other form of Analysis --OPEN DEB*



motorway said:


> It does ?
> 
> *I would be interested in what way ( There are many Gann's I suppose the tape reading one the swing trader etc which one  ?*
> 
> ...





1. 







> From Olsenblog link: The first scaling law states that there is a fixed relationship between the average price move and the time interval over which the price move is measured.



 - Sounds like Ganns squaring of time and price and geometric angles to find relationships between time and price....nothing new here. Only difference is the 'scaling laws' can be tested quickly on a computer and therefore consider more complex time/price squarings than Gann could by hand.

2.







> We define an event as having occurred, when the price has moved down by more than 0.5% from its last high or the reverse; the next event has happened when the price has moved up by more than 0.5% from its last low.



 - Gann discussed a trading signal based on 9 point movements from tops and bottoms, Olsen says use a 0.5% movement....they are doing the same thing. Again olsen has the benefit of a computer to quickly test 0.5% price movements from tops and bottoms and other percentages.

3. Olsen uses the analogy of the richter scale, Gann uses the analogy of telephone (sound wave structure) therefore they are making the same point.

4. 







> From Olsenblog link: Scaling laws play an increasingly important role in natural sciences from biology to physics



 - just sounds similar to Ganns writing of natural phenomena and that of EW theory.

It seems most of that article is based on Gann / Elliot theory and some may have not realised it.


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## luke256 (2 February 2011)

*Re: Fundamental Analysis v Technical Analysis v Any other form of Analysis - OPEN DEB*



tech/a said:


> Fundamental analysis takes Months if not years to un fold--




I totally agree. I purchased HVN in 2005 at about $2.5 and sold at $4 in 2006 because the fundamentals didn't look that great at the time (they were surviving off credit sales and interest free terms - IMO that can't be sustained forever). Then it went up to $7 in 2007. 

My question to people who use fundamental analysis is what was the sound fundamental driver(s) to push it to $7 and then pull it back to $1.8ish in 2009??????

IMO Dilusion pushed it to $7 and fear pulled it back. These emotions can be read off the chart...price movements and volume behind it show the supply and demand.


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## motorway (2 February 2011)

*Re: Fundamental Analysis V Technical Analysis V Any other form of Analysis --OPEN DEB*



luke256 said:


> 1.  - Sounds like Ganns squaring of time and price and geometric angles to find relationships between time and price....nothing new here. Only difference is the 'scaling laws' can be tested quickly on a computer and therefore consider more complex time/price squarings than Gann could by hand.
> 
> 2. - Gann discussed a trading signal based on 9 point movements from tops and bottoms, Olsen says use a 0.5% movement....they are doing the same thing. Again olsen has the benefit of a computer to quickly test 0.5% price movements from tops and bottoms and other percentages.
> 
> ...




Hey Luke to the extent you are interested in it. You will study a little bit before making so many wrong conclusions..

It is exactly on the point of time. That Gann was completely wrong and Olsen is completely right..

Gann beleived you could predict with what he beleived was time
Olsen knows that that time is only a measure. And you can not predict anything with it ( except the time )

That it is something else that allows you to identify what it is important
and the last thing you can do is to predict like Gann did.

Does a Richter scale predict Earthquakes ?
No it measures them as they might  unfold

Everything rests on an understanding of Time
But Gann had NO understanding

Olsen uses ''Intrinsic time" 
Same time as a Point and figure chart uses
Gann uses what Olsen calls a Foreign body to reality Clock Time
Olsen's time is work... He says of it it eats things



> Now you can not predict ( with intrinsic time )
> because you only know the intrinsic time of the past and present
> 
> Not the future
> ...




Yes with a clock you can say what the time will be in 5 years time
But you can predict nothing with that information..

You can forecast though from looking at the work something does over a period of time..

No work .. nothing will be done   = no time...eg a P&F chart will not have moved
Someone will not have earned a degree . A house will not be built
There will be no bubble in the stock market..

The concept of intrinsic time is a key concept because it allows so much useful analysis..



> "That's the difference between intrinsic time and physical time," he laughs, referring to one of the epiphanies that got him hooked on "high-frequency finance" - his term for an approach to markets that, in part, measures time in terms of volatility instead of seconds.
> "It's the same concept that's behind point-and-figure charting, except we do it mathematically instead of visually, which is not an insignificant achievement."  R Olsen





Gann with his flawed concept of time . never understood P&F charts , which he called
Space Charts .. He was unable to see that they incorporated the real and much more powerful Time..

To show how wrong you are . Gann said do not use them . ( though he used their geometric angles etc )
He would never have used Olsen's techniques.

Gann , said by knowing the time he can predict . But the only thing you can predict is the Time..

GEOMETRIC ANGLES PRE DATE Gann . He applied them to the time on the clock and with them could draw pretty lines on a chart . That mean almost nothing.

In Intrinsic time..  They are useful . But again they do not predict.
They define  probabilities and I do not mean of Future predictions .
But of the unfolding of the Runs of Directional changes versus Overshoot ( to use Olsen's terms ) ie on a P&F chart they are a very useful tool.

You have to think in terms of what is on the x & y axis on a P&F chart
and then start to realize what a diagonal line is measuring ( and that is all you are doing )


Olsen  and Gann are POLES a part . EW too imo.. They talk about fractals
But unless you measure work ( intrinsic time ) instead of just the ticking of the clock.
You incorporate too  much noise.. For scaling laws to work .

Best to do and see for your self,, is there work done or not ? Yes then you fill a box on your P&F chart... Time on the clock just draws bars across your screen regardless
always too slow or too fast.. never just right....

Luke you do not understand any of Olsen's Work.
There is nothing important about the .5% it is just example of a scale

Olsen 's work is related to P&F which predates Gann ( really a chart of DC + OS is a P&F CHART ).

That is why his Theory ( better his facts )are  useful
It has application and had application.

P&F goes from ~ at least 1880 to Richard Olsen Today..
Olsen's is back to a pure form of P&F like that of the 1920's tape reading


It speeds up and expands and contacts 
so that scale of the work is always being measured in correct scale
So scaling laws scale eg are Fractal..

Olsen's Intrinsic Time 

But nothing like Gann's 

Motorway


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## Billyb (2 February 2011)

*Re: Fundamental Analysis v Technical Analysis v Any other form of Analysis - OPEN DEB*



luke256 said:


> I totally agree. I purchased HVN in 2005 at about $2.5 and sold at $4 in 2006 because the fundamentals didn't look that great at the time (they were surviving off credit sales and interest free terms - IMO that can't be sustained forever). Then it went up to $7 in 2007.
> 
> My question to people who use fundamental analysis is what was the sound fundamental driver(s) to push it to $7 and then pull it back to $1.8ish in 2009??????




In the long term your fundamental analysis proved right because the market pushed the price down. You could have hung on if you wanted, but that would be based on speculation and so you would have been taking a risk. The whole point of fundamental analysis is to minimise risk.

Fundamental analysis vs technical analysis - The question is which gives better returns long term _and_ how many hours/week is spent on the analysis. If you are spending 20hours a week and making 10% return, and this is in addition to your full time job, then it's pretty crap return for the time you've put in. I'd rather put it in my Ubank at 6.5% and have 20 hours of my life back.


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## IFocus (2 February 2011)

All a bit pointless IMHO

As its all about pattern recognition nothing more nothing less. Anyone that can do this can make returns from the market the method is really irrelevant.


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## motorway (3 February 2011)

IFocus said:


> All a bit pointless IMHO
> 
> As its all about pattern recognition nothing more nothing less. Anyone that can do this can make returns from the market the method is really irrelevant.




And that is part of the problem

http://www.shvoong.com/social-sciences/economics/1655144-rats-pigeons-better-investors-people/

Motorway


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## luke256 (3 February 2011)

motorway said:


> And that is part of the problem
> 
> http://www.shvoong.com/social-sciences/economics/1655144-rats-pigeons-better-investors-people/
> 
> Motorway




If anyone can make returns by just recognising a pattern is this really a problem? Isn't it a good thing. Run scan, find stocks showing pattern, trade and make money!! 

The article you posted was interesting and IMO proved the benefits of pattern recognition as opposed to guessing. I think pattern recognition can be applied to both TA and FA but I choose to only use it on TA now.


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## Noddy (3 February 2011)

motorway said:


> And that is part of the problem
> 
> http://www.shvoong.com/social-sciences/economics/1655144-rats-pigeons-better-investors-people/
> 
> Motorway




Interesting article, and I agree completely.
That's why money management is the key to making money on the stock market.
Cut losses quickly, let profits run.
Still can do well with a 50% success rate IMO.

When you take out the sideways movement, stock must eventually go up or down.
50/50 chance. The patterns are only a tool to get into the market, then money management takes over. Patterns are only a 50/50 proposition, same as all other systems IMO.


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## motorway (3 February 2011)

luke256 said:


> If anyone can make returns by just recognising a pattern is this really a problem? Isn't it a good thing. Run scan, find stocks showing pattern, trade and make money!!
> 
> The article you posted was interesting and IMO proved the benefits of pattern recognition as opposed to guessing. I think pattern recognition can be applied to both TA and FA but I choose to only use it on TA now.




No the problem is are the patterns there ?

eg Gann saw many patterns

many people who talk about value stocks and FA see patterns

So do TA people

The Patterns we want to see relate to Trends

Nothing is pure Trend..
Say there is maybe a Trend to Something  FA or TA

The Trend will be embedded in Randomness
Maybe more Randomness than Trend

And here is a very important point
And need to be very clear about

Random may only be random in the sense of not having to do with what we interested in.. or it might be truly random..Does not matter..

How much Trend component in TA or FA at different time sales ?

eg Decade  Yearly monthly Weekly Daily 15 min 5 min 1 min

Think of a bar chart made up of bars of these frequencies
Or analyzing changes in Fundamentals over these periods

Something is wrong

The Trend component relative to the Random component
Decreases with time frame ( I mean in terms of relative Proportion )

IE it does not Scale,, So something is wrong and the something is very obvious
If you try TA or FA on a 1 min Frequency..

markets are Fractal so why does Trend component not scale with time frame ?
Two reasons . One is the more interesting

It is Easy to see trends on a weekly chart ? Monthly ?
Why not on a 1 min chart ?
Easy to see the FA over a Decade ( xyz did well didn't it )

But could it be seen at the inception when it was a great time to buy ?

If you think in Intrinsic time...and not time
You lose a much larger proportion of the random component

Not because you are using a filter ( That is mistake in thinking )
But because you are measuring in terms or units of the trend component itself.
and thus are in a better position to be a smart Pigeon..

There only two patterns
up and down

There are no other patterns

Up down build the three trends ( Up down Sideways )

Of course it is the how of up and down and the relationship of up and down.

Olsen article uses Gold as example
Tech/a mentioned some good TA techniques

MP VSA P&F

They all defining value in a dynamic way
Very related to the way Olsen desribes



Motorway


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## KurwaJegoMac (3 February 2011)

luke256 said:


> The article you posted was interesting and IMO proved the benefits of pattern recognition as opposed to guessing. I think pattern recognition can be applied to both TA and FA but I choose to only use it on TA now.




I'm not sure how you came to the understanding that the article proved the benefits of pattern recognition?

The main argument of the article is that attempting to recognise patterns is NOT beneficial. Refer to the experiment with the rats and pigeons where they did not attempt to recognise a pattern but chose 'green' every time.

In my view, I don't agree with anybody's ability to 'forecast' whether it be using T/A or F/A. Nobody can accurately predict the future in any endeavour. The world is a chaotic place and all too often people are sucked in and lured into forecasts by so called 'experts'.

Every day your investment is exposed to new effects so it must be evaluated so. Putting your head in the sand anticipating that something is temporary or continuous will only set you up for failure. 

The most important thing in my mind for any investing is risk management (encompassing position sizing, expectancy, etc). If you have a positive expectancy and appropriate position sizing minimising capital risk then you will make money in the long run. You can't be right 100% of the time so it's all about minimising risk for an appropriate return. Then once you hit that big return, ensuring you manage your position accordingly so you don't give too much of it back.


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## KurwaJegoMac (3 February 2011)

Noddy said:


> Interesting article, and I agree completely.
> That's why money management is the key to making money on the stock market.
> Cut losses quickly, let profits run.
> Still can do well with a 50% success rate IMO.




It's such a simple concept and one that almost everyone ignores when they first start. People look for complexity where there shouldn't be any. They don't understand risk management, expectancy or portfolio management and always chase the elusive "I need to always be right to make money in the market"



motorway said:


> There only two patterns
> up and down
> 
> There are no other patterns
> ...




Well said and very true. You need to be dynamic with any assessments you make.


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## Noddy (3 February 2011)

Can pick stocks using a pin and blindfold if you like.
Some will go up, some will go down.
All that matters is how you trade them.
Cut losers short, let winners run. How hard is it ?

To believe that the market is predictable, or there is some holy graille, is a fantasy promoted by vested interests --
Stock brokers
Authors of books
Web sites that want your money
Finance "gurus"
etc. etc.


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## KurwaJegoMac (3 February 2011)

Noddy said:


> Can pick stocks using a pin and blindfold if you like.
> Some will go up, some will go down.
> All that matters is how you trade them.
> Cut losers short, let winners run. How hard is it ?




That's the thing though - it's not hard. But when most people start investing, they listen to the 'experts' such as:



Noddy said:


> To believe that the market is predictable, or there is some holy graille, is a fantasy promoted by vested interests --
> Stock brokers
> Authors of books
> Web sites that want your money
> ...




Also it's something you need to eliminate from your psyche - the fear of losing a profit means most people take it to early and don't let it run. On the flipside, most people remain optimistic that 'the share price was at my purchase price once before, it'll come back again eventually'. For those that have been investing for a while it's a no-brainer, but for newcomers it goes against what they believe in and most will only learn after Mr. Market has taught them (if they survive long enough : )


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## luke256 (3 February 2011)

KurwaJegoMac said:


> I'm not sure how you came to the understanding that the article proved the benefits of pattern recognition?
> 
> The main argument of the article is that attempting to recognise patterns is NOT beneficial. Refer to the experiment with the rats and pigeons where they did not attempt to recognise a pattern but chose 'green' every time.




The article begins by saying that looking for patterns in investing causes heartache but fails to give an adequate example of failed patterns. Here are examples from the article of failed trades:



> We buy a stock because some guy at a barbecue recommended it



 - this is just guessing not pattern recognition based market data.



> We put every dime in stocks after hearing that they''ve trounced bonds forever--only to see bonds zoom past stocks this year



 - Once year performance doesn't create a pattern when you are comparing that one year to 'forever'. Again this is not an example of failed pattern recognition.




> so-called experts scan the momentary twitches of the market and predict what will happen next. Far more often than they''re right, they''re wrong



 - the fact that the article states that so-called experts are wrong more than right is a pattern in itself. Trade opposite to what they advise if thay are consistantly wrong!



> when a day-trader makes a fat profit off a stock after
> doing no research and owning it for only seconds, he''s likely to
> conclude that he''s an analytical genius or has an uncanny feel
> for the market. In truth, that profit is probably an accident



 - again in this example this day trader was not using patterns if they did not do any research. Just another example of guessing.



> (A run of 20 flashes could look something like this: GGGGRGGGGGGGRRGGGGGR.) In guessing which light will flash next, the best strategy is simply to predict green every time, since you stand an 80% chance of being right.



 - Using Motorway's theory that the only patterns are up or down for the market... in the above case the only pattern can be green or red. This test actually proves the benefit of patterns. Green has an 80% occurannce so keep betting on green. Problem is not the pattern but human nature to think we can second guess the pattern.


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## ThingyMajiggy (3 February 2011)

luke256 said:


> Problem is not the pattern but human nature to think we can second guess the pattern.




Thats a pattern in itself yeah? Are we talking patterns as in H&S, ascending hounding dog under a jumping horse patterns or human nature, trading each other relying on the fact that people always do the same things, esp in the markets(early birds, laggers etc)? Interesting points


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## barney (3 February 2011)

ThingyMajiggy said:


> ascending hounding dog under a jumping horse patterns




Lol .... bugger .... I thought i was the only one that used that pattern !!

I'll leave now .... 

.                       :run:


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## Frankie (9 February 2011)

I like to start with fundamental analysis and end with technical analysis. 

I take as many short cuts with fundamental analysis as possible because it can be so damn time consuming. I prefer to let the research houses do most of the work for me.

When it comes to actually placing the trade, technical analysis allows me to set my stop loss and profit targets.


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## Value Hunter (26 May 2016)

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.


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