Why Technical Indicators

The fight continues to rage among traders who use technical indicators and those who prefer fundamental information to establish new positions and to exit current positions.

The fundamentalist believe in knowing all the facts about a company such as price earnings ratios, sales growth, product margins, management capabilities, cost of production, cash flow, etc., etc. while the technicians could care less about the latter and want to see sector price trends and rank, the Relative Strength Index, MACD (moving average convergence divergence), stochastics, trend lines, chart patterns and many more esoterically evolved indicators.

Which method is the best?

There is no Holy Grail of trading and what critics of either method forget that it is the trader who adds the final nuance that results in profit or loss. The more years a professional investor has been working his plan the more successful he usually becomes. The unsuccessful ones have long since gone broke and are no longer in the game.

It is somewhat difficult for me to give great credence to fundamentalists as I am a technician and have a very long profitable track record to prove it; however, I do sometimes look at some of fundamentals. It seems that the longer term trader can do well with a fundamental approach because the timing to buy or sell has a lag time. He does not buy the bottom nor sell the top, but who does?

The technical trader will ignore the informational approach with the use of charts and other indicators. Short term traders must be technicians, especially day traders, as there are no fundamentals upon which they can assess their buys and sells.

Technical trading is based on the psychology of the mass of traders that ride upon the hidden values of the changing fundamentals. Charts and other indicators tell the of the long term health of a company, country or commodity as it is shown in the price action. The fundamentalist looks for the reason for a change to buy or sell whereas the technician tries to find the change in the price action to initiate buys and sells.

No matter what a fundamental trader's position he must be very patient. He may have a position on for years. During that same period there will be waves of highs and lows during which he remains constant in his position. The technician may trade the same equity several times buying the low of the wave and selling the high (hopefully). In commodities it is astute trading, but when it is done in stocks and funds it is called timing.

A combination of technical and fundamental methods can give the best results. For the average guy occasional trader I can only caution him to be very careful. Very few intermittent traders ever make money.

A successful trading approach requires commitment. It is a business the same as owning a shoe store or trucking company. You must give it your all.

Like any business you have to work at it.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.

Copyright 2005

---

Paddle Your Canoe

At some time in your life you have been on... Read More

Investing in Trash Company Stocks

Refuse is a serious issue in any society, about as... Read More

Diversification

Wall Street's watchword has always been diversification, but what does... Read More

Discipline

One of the great "secrets" of successful people is discipline... Read More

Struggling Stocks, Booming Commodities

04/28/2005NASDAQ dropped -12.5% year to date in 2005. S&P500 index... Read More

Enronization

Even if you don't own any of their stock or... Read More

Successful Trading ? Taking Profits - Part 2

Suppose your position has made a big move and you... Read More

Stuff

I continually hear from economists, talking heads, other market letter... Read More

Choosing A Fund

For years I have been saying you must have a... Read More

The Cub; II

We keep hearing about this bear market and that the... Read More

Smart Day Trading Strategies to Help You Make Money in the Stock Market

Stock trading can be a very profitable activity. You can... Read More

Inertia Syndrome

When it comes to buying a stock or mutual fund... Read More

Stocks Options Trading

Let's assume that you want to make some serious money... Read More

You Wont Like This

Why? Because I am going to shatter your conventional wisdom... Read More

Advisory Service for You?

It depends on your level of understanding of the market... Read More

Stock Options Trading Strategies - Lean

Professional stock options traders use the term lean to refer... Read More

How to Read an Annual Report

Every publicly traded company is required by the SEC(Securities and... Read More

How Covered Calls Turned a Trader Around

Sidney felt sick as she looked at her latest OptionsXpress... Read More

The Secret Method to Selecting a Winning Trading System

Every successful trader has a winning system. There are of... Read More

Eternal Sunshine

There is a current movie entitled "Eternal Sunshine of the... Read More

Investing in the Stock Market - When To!

Is really not as important as to how you invest... Read More

What Our Investment Advisor Wont Say Off The Bat

Most advisors will tell you they can beat the market.... Read More

Price Targets

Every day in any financial publication you will find the... Read More

Mid-Cap Stocks: Asset Class with an Identity Crisis

Much like the middle child, mid-cap stocks have long struggled... Read More

Analysts - Do They Really Know The Stock Market?

When you become interested in a stock or mutual fund... Read More

The Shadow

The Shadow knows. There used to be a radio program... Read More

Intervention

Intervention. Now don't let that big word scare you. The... Read More

Dividends

When is a dividend not a dividend?The latest thing "conservative"... Read More

Whos Calling?

Its dinnertime and the phone rings. It's Joe Noname with... Read More

Moving Averages

Every day on CNBC-TV they show a 200-day moving average... Read More

The Seven Mistakes All Novice Traders Make and How to Correct Them

We learnt the following the hard way! If any of... Read More

How To Beat The Mutual Fund Companies At Their Own Game

You'd have had to be living on a desert island... Read More

The Exclusive Club of Large Caps

Picture one of those clubs where only the real heavyweights... Read More