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[USER=82414]@Lewie[/USER] made a few points in his recent post giving me an opportunity "not to respond" but to make a few general comments as a system trader. I represent a trader travelling down the opposite path to Lewie but having the same end game in mind. Technical analysis is based on the psychology of buyers & sellers where Fundamental analysis is basically a background check of how a company has performed & operated in the past, using the past data to estimate future value.Let's take Enron as an examplePeople bought Enron as it was a fundamentally good company & the fundamentals looked good. What I am trying to say is, fundamental analysis can fool you just as much as technical analysis can fool you. The story of Enron Corporation depicts a company that reached dramatic heights only to face the biggest fall from grace "ever" in the United States, disintegrated almost overnight fooling regulators for so long with fake holdings & off-the-books accounting."My idea was to invest in a wide range of businesses that I have some degree of knowledge about"Revenue flow, for instance, you may think you know how Woolworths operates, because you buy your groceries there, but can you clearly articulate how one dollar of revenue flows through the business? The more you understand how a business operates, the more you'll find that you don't know, but in the process, you will become aware of other information, which further improves your understanding of the investment’s risk."I'm trying to invest on the basis of fundamentals"What criteria should you use to pick a stock? Well, you can either use fundamental analysis (the study of balance sheets, PE ratio, P&L statements, also researching any known facts about the company & its managers, even the company’s historical performances) or you can use technical analysis (the study of charts) I prefer technical analysis as I believe all that is known about a company, has already been factored into the share price already. Human fragility such as greed & fear is what fuels the markets, it’s the very same reason why support and resistance areas are so important. Support and resistance is another way of saying - the top and bottom of a price range a direct correlation to traders sentiment about a companies share price. My post is an alternative view & not to be considered in any other way than that.More to follow.Skate.
[USER=82414]@Lewie[/USER] made a few points in his recent post giving me an opportunity "not to respond" but to make a few general comments as a system trader. I represent a trader travelling down the opposite path to Lewie but having the same end game in mind. Technical analysis is based on the psychology of buyers & sellers where Fundamental analysis is basically a background check of how a company has performed & operated in the past, using the past data to estimate future value.
Let's take Enron as an example
People bought Enron as it was a fundamentally good company & the fundamentals looked good. What I am trying to say is, fundamental analysis can fool you just as much as technical analysis can fool you. The story of Enron Corporation depicts a company that reached dramatic heights only to face the biggest fall from grace "ever" in the United States, disintegrated almost overnight fooling regulators for so long with fake holdings & off-the-books accounting.
"My idea was to invest in a wide range of businesses that I have some degree of knowledge about"
Revenue flow, for instance, you may think you know how Woolworths operates, because you buy your groceries there, but can you clearly articulate how one dollar of revenue flows through the business? The more you understand how a business operates, the more you'll find that you don't know, but in the process, you will become aware of other information, which further improves your understanding of the investment’s risk.
"I'm trying to invest on the basis of fundamentals"
What criteria should you use to pick a stock? Well, you can either use fundamental analysis (the study of balance sheets, PE ratio, P&L statements, also researching any known facts about the company & its managers, even the company’s historical performances) or you can use technical analysis (the study of charts) I prefer technical analysis as I believe all that is known about a company, has already been factored into the share price already. Human fragility such as greed & fear is what fuels the markets, it’s the very same reason why support and resistance areas are so important. Support and resistance is another way of saying - the top and bottom of a price range a direct correlation to traders sentiment about a companies share price. My post is an alternative view & not to be considered in any other way than that.
More to follow.
Skate.
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