Technical Analysis or Fundamental Analysis

Discussion in 'Stocks' started by tradingbug, Dec 18, 2012.

  1. This thread is geared to those successfully making consistent money swing trading stocks.

    Do you focus more on TA or FA. While reading any of the Stock Market Wizards interviews, It seems like almost all either strictly use FA or a combination of FA and TA. Therefore, it seems more important to have stock selection down based on FA rather then TA.

    My level of consistency has increased tremendously with the advent of picking stocks fundamentally and then trading them based on TA. Has anyone else noticed that their trading results improved drastically from focusing on FA? I am inclined to say FA is more important to overall profitability than TA in terms of the weight I put into trading and was wondering if anyone else thinks like this.

  2. NoDoji


    Pure T/A, day trading and swing trading. If I really have a fundamental opinion about a stock that I want to swing trade and the technical price action conflicts with the fundamentals, I'll just day trade the stock until the T/A lines up with my opinion.

    Fundamentally, AAPL's a buy and AMZN's a sell.

    Technically, AAPL's a sell and AMZN's a buy.

    I'll go with picture that has money hidden in it.
  3. Thanks for the reply ND. Like you, I started with TA and primarily scalping and migrated to using FA as my main basis of stock picking and TA for my timing. Since FA is a broad subject, I am more specifically focusing on earnings trends. For position trading, this has made a big difference in the stocks that follow through for me. I was just wondering if anyone else has had the same experience or if I am just getting lucky in a good market.

    Thanks for the reply and glad to see you are still doing well.
  4. huchonok


    For me it's better to rely on FA in stocks trading. I've never applied TA in stocks trading as I find it a useless thing.
  5. gotalpha


    i think FA vs TA is one of the oldest question/flamewar in the trader community.

    i'm a vol trader, so i do rely on some TA for delta hedging. the most important thing here is that, if enough people believe in TA, it would work, positive feedback loop, as more people pile on to a specific indicator , it would realize what it is fore-telling.

    on the other hand, FA stops working the moment the "secret sause" is "discovered" by majority of the trader. lets say, there is some awesome ratio that can predict stock price in the next 3 months. then whomever discovers it would trade on that the moment SEc filings are in. then the insiders would get in on the action and trade it BEFORE the filings are in. wiping out the edge. this is a total academic view of the market.

    and of course, FA takes a lot longer to work itself out than, say, TA. so take your pick. is your time horizon 1 day? 1 week? 1 year? then adjust accordingly.

    FA has its fan boys, so does TA. I'm in the process of learning FA and trying to discover that "secret sauce" lol.
  6. my trading idea is FA. but I execute my idea based on TA.

    my FA ideas are: profit-taking, panic sell, buy on the rumor, sell on the news, technical breakout/breakdown. did you notice this month's FOMC policy announcement? that is a good short sale, very typical sell on the news.

    the market always has a theme. some people said if a company is great and sound, then its FA is good. to me, that is not FA. because it is not the right theme to speculate.

    I shorted AAPL not because AAPL is a bad company. my reason is: AAPL can not sustain its growth at that rate any more. I am holding 300shares of AAPL short. that is my fundemental reason. when I see the chart, I do not short it when it prints new high. I saw divergence,shoulder and head pattern, the topping signal, then I sell. or some people said the TA. I shorted it from 680 till 500 (each time after it poped, I shorted). AAPL is my best short sale I did this year.

    another reason is when I saw price target upgrade, some said 800, even 1000, the street tried hard to tell everyone how great it is. this always hinted me "suckers, come here, please take my shares, I am leaving". when those big guys start to unload, it peaked. I must join in them to take advantage of the bear party.

    toke another example of fiscal cliff. when election day, the market goes up, they thought it is Romey. but after Obama was selected, the market dropped hard, the street thought Obama could not handle the fiscal cliff..

    speculation is an art. but you need the right theme, actually the market is tunnel vision, only sees one at one time. that is why in a bull market, all negative news are ignored, or vice versa.

    speculation themes such as rebound,short squeeze, breakout though sounds technical, but actually they are not. someone buy dip, they expect it bounces. particularly in day trading, you have limited time, you would not wait for the market bounces off the bottom, obvious to buy, normally you sense it is near bottom, you buy. that is not technical. fundementally you think there is a bounce. common sense!

    I do not trade based on TA. this friday, I was picking bottom of HLF, bought 3k at 26.3, sold it at 28.0+, think about to sell at 29+, but it retreated, so I dumped. when i saw the sharp drop, I stepped in, thought ok: time to buy (think myself as a short seller) to cover, i didnot see the bounce yet, but it did bounce. it is a trade fundementaly sound.