Technical Analysis vs. Fundamental Analysis

[CanOz]

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]

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]

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]

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]

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]

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]

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]

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]

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]

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.