Some people have the skill to chart-read by forward-thinking of likely events happening because those same patterns have occurred in the past. This is the theory of all forward looking methodologies. Some people like to call it predictions. But they are simply modeling patterns of likely events that might or might not take place.
I totally agree with this as I base my judgements on business cycles and recurring patterns based on those cycles. For shorter time frame traders/investors, T/A is very important because of how they look at the market and how it gives them a fair indication of when and where to invest or gamble. As you said, everyone's pretty much guessing based on past performance whether based on mathematical models or on price indicators.
At the end of the day in my opinion, there's no fool proof method of trading.
Investing long term based on fundamentals builds wealth but at a much slower pace.
But in reality, every ‘systematic’ trade placed is literally ‘predicting’ the market, because of the belief that the past will repeat into the future. If not you wouldn’t place the trade.
I don’t think there are to many dart throwers amongst us.
BTW…fundamentals and fundamental analysis is the only thing that will make you wealthy in the market.
Technical analysis is at its best; only good for lifestyle choices and achieving an income. Sadly most traders using technical analysis would be lucky to be making more money than if they were working for someone else.
Just my view
Frank Dilernia
Although I am a big fan of fundamental analysis and T/A, I do believe that they have an important but seperate roles in investing.
I don't believe that Fundamental analysis is the only way to sure riches.
I constantly do my own fundamental research and find it quite enjoyable and helps me understand the broader picture of the markets and how it responds to those develping reasons.
Where I have gone wrong in the past is letting that knowledge cloud my judgement when it came to trading. From my own experience, fundamentals moving the markets is more akin to a train wreck in slow motion. It takes a while to move.
Trading skills are a totally different kettle of fish and for my style, totally reliant on T/A. When I look at the longer term charts, I can see the fundamentals in play. In shorter term charts, you have every man and his dog jumping in and out and its everyone for themselves.
Even with Fundamentals, placing your investments at the wrong time can have serious draw down consequences. The money flows to where the markets thinks best returns will be achieved, not necessarily where the best business is located. More like a stampede to the next bubble. A good example would be the internet bubble. There was serious money to be made when the going was good. If you had good timing and smart money usually does, you would have left at the right time waiting for the market to crash to pick up bargains based on Fundamentals.
I believe that Fundamental Analysis is best served by using T/A as a timing tool. T/A is a good gauge of investor mood.
When the market crashes, T/A and Fundamentals go out the window.
Daniel