momothebored
Active member
- Messages
- 139
- Likes
- 1
Fascinated why there's a thread on FA in a trading forum.
Curious, what approaches do you use (if any) doing FA?
Curious, what approaches do you use (if any) doing FA?
Fundamental Analysis (Equities)
- Thread starter momothebored
- Start date
- Watchers 9
Jack o'Clubs
Experienced member
- Messages
- 1,554
- Likes
- 342
I do it the other way round. My main tool is FA, I use TA for timing in and, sometimes outs. But then I'm more an investor than a trader. What many TA traders might not realise is that there are some good signals triggered by FA as well, especially for a contrarian. One of my favourites for example is earnings revision momentum. The problem is unless you have some fairly sophisticated information sources (Bloomberg for example), it can be hard to dig out the data, certainly not stuff a spread bet provider can stick up on a free candle chart.
could be use of any economic data, such as interest rates, to make long-term trading decisions.... or a combination of several.
approaches can be as varied as the number of TA trading methods, systems or indicators out there
Personally, I think that we're living in a much more fundamental world than technical at present. As Mr o'Clubs said above, using technicals to enter exit trades is great but fundamentals drive direction as well as give indications of future stress.
IMHO markets are and have been for the last +4yrs drive by fear and over-excitement. In such an environment, having a good grasp of the fundamentals means you can anticipate likely outcomes and position according for the somewhat crazy moves that happen as a result. e.g. today was the ESM ruling, was almost a given that it would be ratified by the German supreme court. An upcoming one is QE, most people expect that QE is a given however, there are a couple of fundamental reasons why the Fed may not act on Thurs. e.g. Looming fiscal cliff (what if they have no more bullets), also the actual stock of treasuries or MBS available to buy. Personally, in relation to QE i'm erring on the side of them probably going but i think it's only marginally in favour of QE3 (55-60% probability). My point is though, understanding these issues can help your p/l a LOT!
ps some days, I don't even look at charts when I trade but then hey i'm only a rookie member
IMHO markets are and have been for the last +4yrs drive by fear and over-excitement. In such an environment, having a good grasp of the fundamentals means you can anticipate likely outcomes and position according for the somewhat crazy moves that happen as a result. e.g. today was the ESM ruling, was almost a given that it would be ratified by the German supreme court. An upcoming one is QE, most people expect that QE is a given however, there are a couple of fundamental reasons why the Fed may not act on Thurs. e.g. Looming fiscal cliff (what if they have no more bullets), also the actual stock of treasuries or MBS available to buy. Personally, in relation to QE i'm erring on the side of them probably going but i think it's only marginally in favour of QE3 (55-60% probability). My point is though, understanding these issues can help your p/l a LOT!
ps some days, I don't even look at charts when I trade but then hey i'm only a rookie member
easttrader
Junior member
- Messages
- 13
- Likes
- 1
Personally, I think that we're living in a much more fundamental world than technical at present. As Mr o'Clubs said above, using technicals to enter exit trades is great but fundamentals drive direction as well as give indications of future stress.
IMHO markets are and have been for the last +4yrs drive by fear and over-excitement. In such an environment, having a good grasp of the fundamentals means you can anticipate likely outcomes and position according for the somewhat crazy moves that happen as a result. e.g. today was the ESM ruling, was almost a given that it would be ratified by the German supreme court. An upcoming one is QE, most people expect that QE is a given however, there are a couple of fundamental reasons why the Fed may not act on Thurs. e.g. Looming fiscal cliff (what if they have no more bullets), also the actual stock of treasuries or MBS available to buy. Personally, in relation to QE i'm erring on the side of them probably going but i think it's only marginally in favour of QE3 (55-60% probability). My point is though, understanding these issues can help your p/l a LOT!
ps some days, I don't even look at charts when I trade but then hey i'm only a rookie member
it's true - fundamental news almost everytime change trends
I'm interested in learning more about how fundermental analysis can identify or support good trading opportunities, as I believe having a solid FA and TA indicator would be a a great thing. Does any one have some good resources that can point me in the right direction of what FA indicators should be used?
It depends, are we talking purely equities or more general? If equities then you need to obviously be honed into what factors affect specific sectors etc. eg cyclical sectors and what not.
If you're talking more generally then you should be reading as much as possible in terms of what is actually going on in the world re the macro picture. In this regard, unfortunately there is no short-cut, it is time-intensive but if you really are interested in markets then it should be interesting stuff to read. Personally, I read (and take with a pinch of salt) broker notes, macro blogs and obviously daily news via Bloomberg, reuters and the FT. In addition, the economist has good articles as project syndicate. I don't neccessarily agree with everything or sometimes much of what I read but I find it useful to find out what a) other people are thinking as that may be reflective of the market and b) what could potentially happen in the future.
A good source for getting an idea of the macro picture apart from the above is a site called rtable.net (which basically gets info from a lot of different sources), the finance section is a bit too seekingalpha centric for my liking though there are some good articles however, the eco section is pretty tight. Also, there's a guy called Scott Sumner who has a blog called the money illusion. I like reading what he has to say not so much for market direction but for a background of the issues facing the states.
In terms of FA indicators for equities, again it depends on sectors however, what is more important than all of that is sentiment therefore, you need to have an idea of whether stocks are likely to get down/upgraded.
oh, the other key, follow the smart money! (if you see some high profile hedgefunds investing in a particular stock i'm not saying just follow them but question what they see that you are not etc etc)
If you're talking more generally then you should be reading as much as possible in terms of what is actually going on in the world re the macro picture. In this regard, unfortunately there is no short-cut, it is time-intensive but if you really are interested in markets then it should be interesting stuff to read. Personally, I read (and take with a pinch of salt) broker notes, macro blogs and obviously daily news via Bloomberg, reuters and the FT. In addition, the economist has good articles as project syndicate. I don't neccessarily agree with everything or sometimes much of what I read but I find it useful to find out what a) other people are thinking as that may be reflective of the market and b) what could potentially happen in the future.
A good source for getting an idea of the macro picture apart from the above is a site called rtable.net (which basically gets info from a lot of different sources), the finance section is a bit too seekingalpha centric for my liking though there are some good articles however, the eco section is pretty tight. Also, there's a guy called Scott Sumner who has a blog called the money illusion. I like reading what he has to say not so much for market direction but for a background of the issues facing the states.
In terms of FA indicators for equities, again it depends on sectors however, what is more important than all of that is sentiment therefore, you need to have an idea of whether stocks are likely to get down/upgraded.
oh, the other key, follow the smart money! (if you see some high profile hedgefunds investing in a particular stock i'm not saying just follow them but question what they see that you are not etc etc)
hello, i agree that FA is very important. FA can be quite complicated and time intensive, but if i had to choose one variable as the most important for valuing a stock, it would be cash flow from operations. This makes sense as theoretically, the value of a security is the present value of future cash flows. In the long term, those cash flows should come from operations. Another important point is that it is much harder to cook the books when it comes to cash flow. The reason is that it easy for analysts to verify a company's cash flow (ending bank account balance - starting bank account balance). It is worth noting that while overall cashflow is difficult to falsify, there is room to declare items as contributing to cash flow from operations rather than cash flow from financing or cash flow from investing.
just my 2 cents. thanks,
just my 2 cents. thanks,
I would actually argue that GDP and Earnings are lagging indicators while the stock market forward-looking.
I would say:
higher earnings forecast ---> higher S&P 500
also,
aggressive monetary expansion ---> higher S&P 500
