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

---

You Don?t HAVE To Be Trading

As a novice trader, you'll often feel the need to... Read More

Analysts - Do They Really Know The Stock Market?

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

Advisory News Letters

Several times each month I am solicited by various market... Read More

Paddle Your Canoe

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

The Shadow

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

Lifestyle Funds Provide Greater Security?

With the stock market stubbornly refusing to settle down and... Read More

Stock Market Investing Odds

The greatest stock market myth is the idea that investing... Read More

How Eating Bitumen Made Me a Better Trader

Trading is a fascinating activity.There are so many layers to... Read More

Kick The Tires

Before you buy another car you walk around the lot,... Read More

Evaluation II

As I said in Part I everyone in the insane... Read More

Mutual Fund Commissions

You have heard about a particular mutual fund from a... Read More

Where Is The Rabbit?

We need a rabbit!This was a pretty horrible week for... Read More

Series 7 Exam

What is the Series 7 Exam? If you... Read More

The Stock Trading Plan - Why You Must Have One To Trade Successfully

This is the continuing story of our two imaginary traders,... Read More

A Personal Stock Market Investment Philosophy

∙ Make every investment in the stock market a long-term... Read More

Time Out

Are you paying any attention to your retirement savings? Do... Read More

Bargain Basement - Finding Stocks That Go Up

Have you been listening to the talking heads on CNBC-TV?... Read More

Dispelling Illusions of the Stock Market

How can you dispel an illusion unless you look directly... Read More

Psychology ? How to Reduce Negative Thoughts Relating to Trading?

The thinking process of the brain relating to the... Read More

Enron Cure

Let's hope you did not have any of the Enron... Read More

How (NOT) to Buy Mutual Funds

When it comes to mutual funds, there is a lot... Read More

Maximizing a Stock Market Investment

Maximizing a stock market investmentThere are several factors an investor... Read More

Long Term Investing

In his wonderful book, 'Multiple Streams of Income', best selling... Read More

Picking Mutual Funds to Outperform the Market

With over 6,000 mutual funds available, it may be tempting... Read More

The Elephant

Four blind men were asked to give a description of... Read More

How Much Money Can I Make With Trading? What Account Size Do I Need To Start?

What account size do I need?How much money can I... Read More

Inverted Interest Rates

Inverted interest rates? What's that? Who cares? Even if you... Read More

The Inside Scoop on Mutual Fund Rip Offs

The bear market that showed up at the end of... Read More

Outsourcing

It's about time someone spoke the truth concerning outsourcing. The... Read More

It Cant Be Done

Wouldn't it be nice if you were only in the... Read More

Investing in Dividend Paying Stocks

I was recently interviewed for a press release through a... Read More

Dont Buy Worldcom! A Guide to Wise Bottom Fishing

Over the past few months, several investment professionals have brought... Read More

The Club

Yesterday I received my monthly issue of MONEY magazine. This... Read More