Technical Analysis?

Question

When I started investing I admittedly didn't have a clue what I was doing. I was very impulsive and didn't do nearly enough research. At the time, fundamental analysis was all I understood and I barely understood that.

Over the years (5 or so) I've been bitten by the technical analysis bug. I love technical analysis. It seems to me, a person could be a very successful investor on technical analysis alone.

How do you guys feel about that? Is that an accurate statement? With minimal fundamental analysis and lots of technical analysis can a person invest successfully? Or would that be considered more "trading" vs. "investing?"

Answer 1

Technical Analysis from my viewpoint is nonsense.  According to Warren Buffet, the only thing that matters is finding a fundamentally sound company with reasonable prospects selling at a price that affords an investor a good margin of safety, by selling below its intrinsic value.  In other words a price quotation should only be a reference point to compare with what you "value" the company to be - if it is lower then you should consider an investment if it is higher then it is speculation.

Momentum trading and trend chasing is a wreckless way to manage your money.  As with other things in life, following the herd never tends to take you in the right direction - avoid being a lemming and focus on sound analysis and common sense.

Answer 2

http://beanieville.blogspot.com/2008/02/...

Answer 3

Technical Analysis is a great compliment to fundamental analysis. However, by itself, above average market returns are not sustainable through technical analysis alone.

Answer 4

I trade options, I don't invest.  So using that as a precursor, I dislike technical analysis mainly because it is very easy to say 'oh I know why the stock price went up; it's is because you see a head and shoulders before volume ramped up'.  Hindsight is great but I can't buy into it.  I use very basic indicators like moving averages to determine when to buy or sell.  And I try to use trailing stops or other measures to get out if I am wrong.

Answer 5

you can find it

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Answer 6

I believe that your last statement is more accurate then the rest. It is sometime more accurate to say "speculation" vs "investing/trading".

From my part, I do not think that any of them alone is sufficient to be a good investor. I use fundamental analysis to decide on portfolio allocation and strategy and I use technical analysis for market (entry/ exit) timing.

Answer 7

I always use both technical analysis and fundamental here is my take on it.

1 Technicals always outweigh everything.

2 Technical work much better for short term trading which is not bad.

3 Fundamentalism is more long term geared.

I do not think you need to use fundamental analysis but if you are using technicals to invest with you might want to look at a bigger chart.

EX. 5 year chart with weekly intervals.

Answer 8

Yes, I think it is more geared toward trading than investing as others have said.

It is another tool.

I didn't believe in it much until I learned to see some patterns that did repeat. Being a chartist is a little different than "technical", a part of it.  But I think many of the followers tend to look too hard and ignore big factors in favor of the technical conclusions.  

I like to look at moving averages and Bollinger bands. They can give you an idea if over a period of time, a stock or stocks are under or over the "average" value.

But it can lead you astray as well.

For example if Israel attacked Iran and oil shot to $200 a barrel, all the technical and even the fundamentals would say BUY as the market would be going in the toilet.

Or take the internet bubble where the prices of stocks blew through all technical and fundamental levels and continued to do so for years.

One big problem with technical and even most fundamental analysis is that the data is all trailing, history, past performance.

And what you need to know (guess at) is the future.

In the end you still need to come to some personal conclusion as to WHY the data is the way it is to make a decision where a stock may go.  

Investing is not solely a numbers game as much as we like to try to reduce it that.

Good Luck