Technical Analysis vs. Fundamental Analysis

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!

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!

Click to expand...

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.

Re: HDR - Hardman Resources

Oh ok. Great!

Re: HDR - Hardman Resources

champ2003 said:

Oh ok. Great!

Click to expand...

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.

Click to expand...

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.

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....

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!

Re: Technical Analysis vs Fundamental Analysis

Rafa said:

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

Click to expand...

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.

Re: Technical Analysis vs Fundamental Analysis

your a smart bugger Joe Blow!!!

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!

Click to expand...

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.

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.

Click to expand...

Well done Willow

This encaspulates the argument in a single sentence.

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

Re: HDR - Hardman Resources

TheAnalyst said:

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

Click to expand...

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.

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.

Click to expand...

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.

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.

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.

Click to expand...

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.

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.

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!

Click to expand...

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

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.

Click to expand...

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

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?"

Click to expand...

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

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...