Fundamental analyse or technical analyse (which one is more profitable)

Fundamental analyse or technical analyse (which one is more profitable) ??

Fundamentally, technical analysis is 90% successful, 30% of the time.

Its the sex panther of investing

just randomly select 200 out of the blue from all asset classes and invest in them.

Fundamentals are more applicable to long-term investing, while technicals are better for short-term trading. But one isn’t “better” than the other.

#UseThemTogether

I agree on the fundamental part.

On the trading part, though, I think that it is more complicated than that. For example, in the small to mid-cap world, no analysis is going to make you predict when someone starts dumping a large block on the open market and crushes the price day after day for like a week.

If you’re running extremely large funds, you kinda have to do fundamental analysis, because technical analysis generally involves so much trading that your transaction costs and (more importantly) your market impact are going to screw up your trades.

That said, when you take a fundamental approach, it can be helpful to look at technicals for deciding when to pull the trigger. At the same time, if you have long holding periods (as many fundamental strategies do), it may not be worth taking too much time to analyze the technicals, because they will probably wash out to tiny fractions by the time you close your position. If your mind is better in terms of analyzing companies (as opposed to analyzing trading activity, which is a different skill), then you probably want to spend your time analyzing the next company, rather than analyzing the price curve to pick your entry point, because you’ll likely get a bigger bang for your mental buck that way.

Fundamental analysis is generally easier to market, because there are a lot more places that need fundamental analysts. Clients also find it easier to digest stories about companies than stories about the ticker tape. A lot of investors don’t really believe technical analysis works in the first place and think of it as a slightly more sophisticated version of astrology.

On the other hand, trading stories are often more exciting, because you can talk about your emotions as the price rises and falls and how you got to get in and out at just the right time.

If you do believe that technical analysis works (I’m agnostic, but I think it works in certain ways, because of how the price history affects perceptions of risk and changes people’s risk tolerances), one advantage of technical analysis is that it’s generally a lot faster to come to a conclusion than fundamental analysis, which requires more research into how the company works and the specific conditions of the business.

You’ll also notice that stock analysis programs available on the web tend to be technical analysis oriented. That’s because you have fewer data needs (really just price and volume histories, and maybe a few other points), and it’s generally easier to get long histories of prices than it is to get long histories of demand for underwire bras or timex watches or whatever.

Precisly true.

There is a third type of analysis, which is impossible to market – that I call intuitive analysis (actually more about synthesis, than analysis). It is what makes the superior analyst, and involves taking all the observations, and synthesizing, connecting thousands of dots at the subcounscouly level, something you can’t really articulate verbally.

You can lay fundamanetal analysis out on paper and convince investors it’s good, when the investment is clearly dog****. But investors like it, because it’s very “left brain”. Intuition is too abstract for them. But in the end outperformance comes mostly from market intuition, everyone else has fundamental and technical so they are no advantage.

Intuitive analysis sounds like a rebranding of “investing by gut feel,” which is a perrenial favorite around here.

I’m partial to _ winging it _, myself.

Well, there are many uneducated people who have ignored fundamental analysis and/or have poor intuition (intuition uses the fundamentals as its source)…who cite “gut feel” as their basis. There’s that, and then there’s Warren Buffet.

Totally different things, which is why you can’t market it, nobody knows which you are…