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

---

Is the Stock Market for You?

Many people would like to diversify their portfolios to expand... Read More

What is a Mutual Fund?

Ever wondered what is a mutual fund? A mutual fund... Read More

Fake Money

Reach in your pocket and take out that big roll... Read More

Dividends

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

Dont Ask Your Broker

Unfortunately, most of you who are reading my column are... Read More

Structured Settlement; Lawyers in NY and Mutual Funds

Minority Report the movie may not be far off if... Read More

How to Make Big Money Safely in Stock Market

(1) Stock Market is Tough Place to Make Any Money... Read More

Trading Tips No 8: Picking the Best Stock Market Price

Carefully thinking through your goal as a trader is of... Read More

Online Investing & Stock & Share Trading: 4 Reasons Why Most Online Investors & Traders Go Broke

Are you attracted to the idea of being in control... Read More

A Stock Market Investment Plan that Never Lets You Down

The bulls and bears of the stock market are both... Read More

Paddle Your Canoe

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

Investment Attorneys and Garbage Stocks

How is it possible that trash Companies are posting less... Read More

Patterns

The Law of Chaos is the theory of random unpredictable... Read More

Market Success

Who are the successful investors?There are those who follow the... Read More

Getting Even

I know there are a lot of you out there... Read More

Why the Majority Fail at Stock Investing

The gleam and bright lights of Wall Street lure in... Read More

How To Be A Winner

Everyone who invests in the stock market wants to be... Read More

Forecasting the Stock Market

Every day I see in the financial section of newspapers... Read More

Why Change Funds?

On November 17 I bought 7 different mutual funds and... Read More

Investment Research - The Dalbar Study

Very few people, even professionals, have heard of the Dalbar... Read More

Stock Market Insanity

Let's first define insanity. It is doing the same thing... Read More

Successful Trading ? Establish Your Risk Level

Before you embark upon a journey of trading stocks or... Read More

Diversification

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

Shadow Bull

As one of my regular readers you know I have... Read More

Stock Trading - Daddy, Why Arent We Rich?

One Saturday morning, while he was sitting at his computer... Read More

Online Broker Trade History Not Doing the Job

Let me start by saying that...Most online brokers do not... Read More

Complacency Indicator

If you haven't heard of the technical indicator with the... Read More

Stock Chart Reading

As an investor you will want to check out any... Read More

Dont Fight The Fed

One of the great truisms of Wall Street is "Don't... Read More

China Syndrome

There has been great condemnation recently because China has been... Read More

Will the Stock Market be Lower in October?

The stock market often closes a week in the middle... Read More

Buy Low - Sell High

Now where have I heard that before? I know. It... Read More

The Golden Goose is Sick

It is finally catching up with them. The brokerage companies... Read More