Fundamental vs. Technical Analysis

[wildwood]

I see debates about fundamental vs. technical analysis quite often here and elsewhere. I think it's important to ask the right questions. I don't think it's correct to frame the debate as fundamental vs. TA. They both have strengths and weaknesses. There are enormously successful people who use primarily fundamental (Jim Rogers and Warren Buffett are two examples), and there are enormously successful traders who use primarily TA (John Murphy is one example). I like to use both. I first want to develop a long term fundamental view (long term for me is anywhere from 3 to 10 years), and then I want to trade that long term fundamental view using TA to find good entry points and control risk. Position sizing and money management is a different topic but certainly plays into this mix. Also think about a style that fits your personality. This is crucial. Read about the great traders and model the ones whose approach you like. All the best.

[Sniper]

Nice post. Just to add, Investors Business Daily is a great resource to use both Fundamental and Technical analysis for stock selection.

[styles7]

Spoken like two people who know what their talking about. The only thing I can add to that is when you've been watching one of the best fundamental stocks around and you've been Patient enough to wait for a perfect technical entry point, and the general market and other leading stocks look good for a move - don't short change yourself, use leverage and don't over diversify, you can even just let it all ride. Like Jesse Livermore in 'Reminiscences of a stock operator' or any over the other gutsy famous stock operators in the history of the market.

Good luck playin the market and poker

Later
Justin

[Dan Mezick]

Wildwood,

You are an experienced trader.

[ QUOTE ]
Position sizing and money management is a different topic but certainly plays into this mix.

[/ QUOTE ]

With regard to entry, I noticed you scaled into AUY as follows:

QTY Cost
13000 3.69
82400 3.69
40423 3.66


Would you elaborate on these a little? Suggested topics: What was the intent of the 3 orders as a group, (instead of 1), what actually happened with price at the time of execution, what was the execution order of these trades, etc.

[Dan Mezick]

[ QUOTE ]
Also think about a style that fits your personality. This is crucial.

[/ QUOTE ]

This reply has little to do with Fundamental vs. technical approaches. Even so: IMO this psychological piece of the trading puzzle, your own personality, does not get nearly enough coverage.

By definition you must study, understand and develop YOUR individual psychology, personality and temperament (to get this crucial aspect of style selection right.)

Which traders actually take the time to do this important work, before trading with real money?

Generally, it's the long-term winners, or traders who had an experience of "forced awareness". These are often the exact same people.

This quote is from the book description for "The Disciplined Trader" by Mark Douglas:

[ QUOTE ]
Successful trading is 80% psychological and 20% methodological. Emotion is the enemy of successful trades. That's why, even with a modest knowledge of fundamental and technical information, the trader who is in psychological control will be the winner in the trading environement. The Disciplined Trader helps traders learn the critical behaviors necessary in responding to market conditions and opportunities. Experienced commodities trader and teacher of trading dynamics, Mark Douglas, thorugh his own early misfortunes in the market, has considered and confronted the problems experienced in trading (what he calls "forced awareness"). Douglas examines and discusses how he found the market to be an environment where the individual trader "has the freedom to create his own results," unimpeded by many of the constraints existing in modern social life.

[/ QUOTE ]

I know 30% a year is achievable in trading with low risk, relative to reward.

Wildwood is clearly very experienced, and I hope he shares more of what he knows.

[wildwood]

Hi Dan,
I wasn't scaling into the position. I made a couple of errors. One was, for some reason, I thought it was a 50K account instead of 500K. Another was I didn't quite understand the trading mechanics of the contest site. I didn't know about the 20 minute delay until later in the morning. I basically placed the orders on top of each other. It turned out ok. fwiw
edit: I placed one order before the market opened; I don't think you have the option to change an order once submitted on the contest site. A little different than real world.

[Dan Mezick]

Wow that's not the answer I expected!

I noted you placed 40K, 80K and 120K orders which I would have bet was intentionally scaled. Thanks for the explanation.