Investing as a fundamentalist or as a technician or both???
The fundamentalist concentrates on economics and the health of the economy. The technician relies on charts to determine price changes.
Money moves the markets and big money is always right no matter what the reason or cause. The skilled technical analyzer will always see the price movement before any other.
The fact that 'cycles' exist and recur again and again, evident through historical price data which can be analyzed to make future predictions and hence the argument for technical analysis.
Only by having a price history of a particular entity or a particular market can one truly expect to forecast the potential of an investment and the nature of its personality, the extremes it has reached over time as well as where it has deviated from past patterns indicating the possibility of as a new significant development in its 'life' cycle.
Only in the general sense do the fundamentals concern the traders or investors who are looking for capital gains on a regular basis. Day trading fundamentals in stock trading, futures trading or even currency trading and forex trading would certainly send the day trader bankrupt from short term corrections against the fundamental bias.
However for the long term investor, 'buy and hold' is a fundamental strategy, it assumes the price will in the long run continue on an upward bias.
The modern version of buy and hold has been perverted 'somewhat' by the big brokerage firms, hedge funds and mutual funds. Holding on to an investment that is in decline certainly does not make sense.
Thus, charts clearly illustrates the major and minor trend whether up or down allowing one to formulate a strategy to limit losses, let profits run and ensure an exist plan is in place, depending on the fundamentals of the day.
It is true to say to some extent that chartist sell too soon out of fear and on occasions missing the bigger move that often make a fundamentalist however technical analysis if used with discipline will limit ones risk and allows you to live to trade another day.
Ultimately for success one needs to combine both strategies to suit the market you are trading. The use of both strategies can pay off keeping the trader/investor active to avoid becoming comatose or fearful of riding a huge wave.
Selling during times of strength and buying during times of weakness as the run unfolds relying on technical analysis but keeping within the overall fundamental trend allows you the best of both worlds.
The speculative markets are the largest arena in the world that exhibits greed and fear. If your attraction to the 'blood and sweat' is motivated by the emotions of greed to make money you will surely fail. This is a truth many have learnt the 'hard' way.
Many are deluded into thinking they are intellectually and rationally sound in their thinking but in reality we all succumb at some stage to emotional greed.
Thus, in an emotional market one must use their "BRAIN" not to make money but to control ones "EMOTIONS".
No comments:
Post a Comment