StockFetcher Forums · General Discussion · Hit Me Baby One More Time: Fundamental Analysis vs. Technical Analysis<< 1 2 >>Post Follow-up
nikoschopen
2,824 posts
msg #44864
Ignore nikoschopen
6/11/2006 3:12:15 AM

I stumbled upon the following post at the elitetrader.com that nicely summarized the difference between the techies and the fundies. Considering that this never-ending debate has lately captured the imagination of some of the best minds of StockFetcher, I thought it apropos to reproduce it here for ure pleasure.

___________________


To aid in the comprehension of how technical analysis works, one needs to know that a finite number of traders participate in the markets on any given day. These individuals interact with each other on the trading floor and form collective behavior patterns. These patterns are not only observable and quantifiable, but also repeat themselves with statistical reliability; that said, technical analysis is a method that organizes these collective behavior patterns that give clear indications of when there is a greater probability of one thing occurring over another. Fundamental analysis attempts to take into consideration mathematical models that weigh the significance of a variety of variables (corporate earnings and revenues, price-to earnings ratio, gross margins, valuations, etc..) that could effect the relative balance or imbalance between the supply and demand of a particular stock, commodity, or financial instrument. The trouble is that this economic equation that defines the laws of supply and demand does not have an exponential variable to quantify fear or greed. Fear or greed is an element of human nature which is called market sentiment or behavioral analysis, and fundamental analysis gives it no consideration. It's people who express their beliefs and expectations about the future that make prices move and not fundamental models. The fact that a fundamental model makes a logical and reasonable projection is not much value if traders who are responsible for most of the trading volume are not aware of the model or simply don't believe in it. Bob Prechter, a famous practitioner of technical analysis once commented that, "... the main problem with fundamental analysis is that its indicators are removed from the market itself. The analyst assumes causality between external events and market movements, a concept which is almost certainly false. But, just as important, and less recognized, is that fundamental analysis almost always requires a forecast of the fundamental data itself before conclusions about the market are drawn. The analyst is then forced to take a second step in coming to a conclusion about how those forecasted events will affect the markets! Technicians only have one step to take, which gives them an edge right off the bat. Their main advantage is that they don't have to forecast their indicators."


markcrisp
187 posts
msg #44888
Ignore markcrisp
6/12/2006 5:18:40 AM

Technico-fundamental approach works best for me.

TIE, HANS in 2005/06




nikoschopen
2,824 posts
msg #44903
Ignore nikoschopen
6/12/2006 4:13:28 PM

The devil's in the detail, of course. But I figure everything you could possibly know from fundamental analysis is already baked into the unsavory pie we technicians call chart.


EWZuber
1,373 posts
msg #44910
Ignore EWZuber
6/13/2006 2:10:27 AM

Fundamentals can be very important but by themselves are just about worthless. To see this for yourself just pull up a chart on bigcharts and under the heading 'upper indicators' enable the pulldown 'earnings with values'.
This will enable you to see what earnings were for your ticker and whether or not they are better or worse than the same qtr. yr/yr.
Right now you can pull up one chart after another of companies with great earnings showing qtr after qtr of improvements but they are all headed down with the market.
That said I have also found that if you can find a company that is long term oversold (monthly chart or longer) and is in the process of making a fundamental turnaround from losses to profit you are almost guaranteed a massive move higher under heavy volume. Find these conditions and there is no need to wait for the volume to come in before entering.
This combination of fundamentals and technicals is hard to beat, IMO.


nikoschopen
2,824 posts
msg #44916
Ignore nikoschopen
6/13/2006 1:02:50 PM

But I can't possible see how fundamentalists alone can drive up, let alone sustain, the price of a stock. They need the help of techies to achieve such a lofty goal. And I think that's where both camps fail to understand. Each camp believes they can pull themselves up by their own bootstring.


maxreturn
745 posts
msg #44917
Ignore maxreturn
6/13/2006 1:25:06 PM

Hello EWZuber, Since SF does not allow for filtering based on monthly data, how do you go about finding stocks that are undergoing monthly accumulation after a period of monthly distribution?


EWZuber
1,373 posts
msg #44963
Ignore EWZuber
6/14/2006 6:26:00 PM

maxreturn
I have some screens that look for oversold conditions, stochastic fast line convergence or crossover above the slow line for Daily and Weekly Charts. From there I have to screen manually for Monthly Chart indicators.


nikoschopen
2,824 posts
msg #44971
Ignore nikoschopen
6/14/2006 10:34:15 PM

EWZuber,

It looks like you and I are the only stoch fans around here. I have some old tricks up my sleeve when it comes to slinging the stochastics. No doubt you prolly have a fast one ureself now and then that you can't resist pulling. Maybe we should exchange a few ideas one of these days.


EWZuber
1,373 posts
msg #45026
Ignore EWZuber
6/16/2006 2:34:06 PM

nikoschopen
Feel free to email me at rickzuber@hotmail.com.
I'd like to see what you have discovered as well.


nikoschopen
2,824 posts
msg #45107
Ignore nikoschopen
6/19/2006 3:29:51 AM

EWZuber,

By no means am I a Stoch afficionado, but one of my perennial "trick" is to use two stochastics of different periods. Basically this setup uses Stoch(39,1) and Stoch(7,3). I would go long when the Stoch(39,1) is above 70 while the Stoch(7,3) just crossed above 30. Reverse course for the short setup. That's all for now, but more will come in due time.


StockFetcher Forums · General Discussion · Hit Me Baby One More Time: Fundamental Analysis vs. Technical Analysis<< 1 2 >>Post Follow-up

*** Disclaimer *** StockFetcher.com does not endorse or suggest any of the securities which are returned in any of the searches or filters. They are provided purely for informational and research purposes. StockFetcher.com does not recommend particular securities. StockFetcher.com, Vestyl Software, L.L.C. and involved content providers shall not be liable for any errors or delays in the content, or for any actions taken based on the content.


Copyright 2016 - Vestyl Software L.L.C.Terms of Service | License | Questions or comments? Contact Us
EOD Data sources: DDFPlus & CSI Data Quotes delayed during active market hours. Delay times are at least 15 mins for NASDAQ, 20 mins for NYSE and Amex. Delayed intraday data provided by DDFPlus