Day Trading & Forex Forum

tommog

Hi,
Im interested to know how economists or fundamental analysists feel technical traders fit into the greater scheme of things. Very often a technical trader will be going against the overall fundamental picture. If enough traders are trading this way is it enough to halt a natural fundamental move? I believe markets are there to meet the needs of fundmental decisions. Such as U.S increasing interest rates the FX market is there to allow people to transfer their savings into dollars to make the most of the increased yield. The thought that people only use an exchange to put squiggily lines on makes it seem a little bit pointless having a market, im not arguing whether it "works" or not im just saying how is it any different to a strategy to use in vegas?

Having said this i am a professional trader using almost exclusively a technical approach. This is how i make money. I would love to take a fundamental approach but i have never been able to make assumptions with a high probability outcome this way.

I dont mean this to sound like a traditional "which is best technical analysis or fundamental". My question is to those of you more experienced economists, has their been a negative impact on fundamental trading since the rise of technical traders? Or in your opinion do they compliment each other? If in your opinion they dont compliment each other where does this leave the world of economics if more and more people make financial decisions not based on sound reason but computerised algorithms?

Id appreciate the insights of somebody clever enough to see the markets from an economic standpoint

Trader333

They probably don't even consider it.


Paul

dbphoenix

I agree. If fundamentalists take notice of technicians at all, they are probably more amused than anything else.

Db

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Db

bbmac

I once heard a successful fund mananger who based trading decisions purely on fundamentals call technical traders, 'star gazers' and insisted he didn't know any that made money. Generally speaking, fundie traders are more closed to technical ideas/methods than techies are to fundamental analysys it seems.

I'm reminded of a great story about a fundie and a techie walking past a skyscaper and on looking up saw a huge chunk of the roof had come off and was hurtling it's way down to the ground above them. The techie jumped clear and was saved, the fundie just stood looking and did not move. The giant piece of the building hit him and fatally injured him, and with his dying words on being asked by the techie why he too didn't jump safely clear of it's path, he replied 'I thought it would go back up.' Lol.

Overall there is no doubt that it is the perception of value based on fundamental factors (socio, political,economic) that drive price but within those moves Technical analysis plays a part, and is a useful tool from which to develop a trading edge. Further there is much evidence that since the wide useage of tech analysis some market moves within the general fundamentally led moves are purely technically based/led.

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TheBramble

Are you sure about that? I've yet to be convinced that it's not price driving the fundamentals.

tommog

Id like to think so, but what about traders that react to a break of a level/bounce of a level MACD cross... lunar eclipse whatever it may be that causes an influx of traders to enter the market. It could push the price and therefore affect fundamentals in an unnatural way? By "unatural" i mean a factor outside the supply and demand of the physical market. For example crude reserves are low, there is shortage in supply prices market should go up but a major resistance level forces prices down. Does this play a part in a fundamental view of the market?

dbphoenix

The story, however, has more to do with competence than with FA v. TA. There are plenty of technicians who would stand there hoping for a reversal and be squashed flat, just as there are plenty of fundamentalists who would have taken at least some profits at the first sign of trouble, then stood aside until value was found once again (which, in this case, would likely be never, and the fundamentalist would then move on to something else, his funds intact).

Db

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Db

dbphoenix

Technical traders have an exaggerated opinion of their influence on the market. To think that a MACD anything would have any effect on price movement would assume that (a) a great many traders are using MACD and that (b) those who do are using the same settings, looking at the same timeframe, displaying the indicator in the same way, employing it in the same way, etc. Given the overwhelming number of variables, whatever one thinks one sees with regard to some reaction to what one thinks an indicator is doing is more likely wishful thinking than anything else (ditto stochastics, trendlines, pivot points, fib, and so on).

Beyond that, fundamentals have only a casual relationship with price, which is why fundamentalists generally could not care less about daily -- or even weekly -- fluctuations in price. They are concerned with "value". They just define value in a different way than technicians do.

Db

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Db