Article Trading with Fundamentals

RUDEBOY

Experienced member
1,157 6
LION63, i am sorry if i have put this thread off track? O.K. here is a question! FA is done by the 'BIG BOYS', and the volume is apparent.......TA boys, can they have a go now? Rude.
 

LION63

Established member
746 33
You only have to look at the numbers, most of the members on these boards (at least 95%, probably more) are technical traders and they must do large numbers of trades between them so they are already having a go. They must be a very fair reflection of traders out there and numbers do not lie. Some work/have worked for various institutions that have large sums of money traded on a technical basis yielding their customers decent returns on a yearly basis. There must be few bulge bracket firms that trade on this basis and the staff and investors are quite happy.
 
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SOCRATES

Veteren member
4,966 134
LION there are two statements you have made above that have caught my eye:~

The first one is; "Listen to what is being said whilst they are still observing the charts".etc.,

And the second one; "so they are already having a go".

Your descriptions are so apt and terribly funny. I have one of my people visiing this evening. We are sitting in here and choking with laughter at the idea of these peoples' pointless and endless disseminations and arguments.

This is because none of them really know what it is they are doing. One relies on the other in the belief the other one knows, but in the end analysis neither of them really know anything.

This is both funny and dangerous.

I can only liken it to an attempt, to ride a penny farthing bicycle wearing a full suit of medieval armour in the middle of the rush hour going round Hyde Park Corner !
 

ducati998

Experienced member
1,193 68
MrCharts



More importantly I realised I could increase my funds much faster by an integrated approach which involved a simple understanding of the significance of fundamental news stories pre-market in the US and, crucially, how to successfully and consistently trade them intra-day.
Right up to this point, I was ok.
Now, unfortunately what you are advocating in this paragraph is not "Fundamental analysis" in any shape or form. ( intergrated approach ) it is quite simply looking for stocks with "NEWS" that will cause some volatility.

Understanding the significance.....................
If you mean by this, understanding that it may cause an increase in volatility, then why not just say so, and not dress it up to be something it is not.

Because if you are saying you can take the "News" and calculate from the Financial Statements what will happen intra-day, you are misleading your audience.


Take today, Goldman Sachs came out with news before the market opened which placed it on my watch list. I could have profited from its early move but I was busy with another stock. However, this evening it presented a set up which has a very high percentage success rate and I traded it for a profit of $1.24 per share, strictly adhering to my rules of entry and exit. There was no level 2 involved. "The news is in the price" is total nonsense, otherwise everything would flat line. It is the reaction of traders and institutions which moves price. Price has little relation to value. It is simply the meeting point of supply and demand at any particular time.
Presented a set-up that has a high % success rate.
Research studies that show this?
Or just your personal finding based on 1000's, 10,000's, 1000,000's of trades?

The reaction of traders, & institutions move prices....................agreed.
Price has little relation to value.

If you are a daytrader, agreed, which negates your integrated approach does it not?
If you are a Value investor, then it is an integeral consideration of every trade decision.

Meeting point of supply & demand.
Twaddle.

Daytraders, by definition do not hold stocks for any length of time.
Any Specialist or MM worth his salt, has a pretty accurate idea as to the % of his inventory turns over each day with daytraders.

The MM wants "VOLUME" as this is how the "EXCHANGE" generates revenue ( 1 of )
Therefore the greater the volatility of the stock, the greater the # of daytraders will be drawn to his stock.

Of course if "News" from the "Business" actually is released, then he is helped as more will be watching for increased activity or VOLUME, but this has nothing to do with Supply & Demand, as the shares will all be returned to him at the end of the day.

Save, those bought by longer term traders or investors.
By studying his inventory and his order book, he will be able to gauge true S&D.
Studying volume will not advance your knowledge one jot, unless you have far more information, which is highly unlikely.

The return on capital employed was 1.22% in 75 minutes - without any gearing. If I had chosen to take up the four fold gearing facility in my account, the return would have been 5% - though such gearing calculations are essentially meaningless - an arithmetical construct. The risk was 15c-20c maximum with a very low %age probability of that stop being hit. I have no overnight risk whatsoever and can exit a trade within seconds. My funds are being sweated to produce the maximum return and I am in control as much as is humanly possible.
What I find interesting is the sudden switch to a % based return.
GS closed at $102.65

What % of total Capital did you use? Without this figure, just quoting a 1.22% return is meaningless.

If you used 100% of your trading capital, then a very nice return.
If you used 5% of your capital, while not a complete waste of time, not really worth the effort, as 5% * 1.22% = not very much.

That you suggest a substantial % of funds utilised by the comment,............"sweating them" what would you do in the case of the Stock being suspended from trading?

You could be seriously hurt, if when it resumes trading it "gaps" seriously against you.
Your trading plan is just so misleading, and dangerous for novice traders, that I question whether it is advice, or an advertorial you are posting here.

So, big deal, you might say. The point is that you can combine an understanding of fundamental analysis with reading the market intra day and make profits disproportionally greater than using purely FA or TA.
You are not utilising an FA approach at all, just momentum as usual. At least be reasonably accurate in your posting. Intra-day & Fundamentals are not a happy mix.

In my opinion, anyone who only uses FA or TA, or who deprecates one against the other, is simply not being as efficient as someone who uses both in an integrated, understanding way.
It is your opinion.
To my mind you have provided no evidence of analysis of a fundamental nature within a daytrading context with which to support your opinion. You use "news" to identify potential VOLATILITY, this is not a fundamental analysis, this is just a screening technique that many software systems provide.

FA versus TA is an artificial construct and those who spend precious time arguing for one over the other are simply not employing their time efficiently - all in my opinion only, of course.
To my mind they are fundamentally different. You will waste your time trying to integrate them, they are as different as night and day. What you may see, is a confluence of analysis in a specific set of circumstances, and this can be traded, but it is certainly not on an intra-day timeframe.

cheers d998
 

ducati998

Experienced member
1,193 68
9999999999999999999999999999
 
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chump

Senior member
2,212 274
Mr D,
"To my mind they are fundamentally different. You will waste your time trying to integrate them, they are as different as night and day. "

I'm surprised to read this from you.....at the very bottomline trading is all about a psychological numbers game and both FA and TA are simply organisational tools for helping us to engage in that game ...whether they are effective or not appears to me to depend only on how much understanding the user has of these tools and how to use them ...and for clarity we're not talking about a newbie techie who thinks a ma xover is the holy grail ..or a fundie who thinks a P/E tells him all he needs to know about a company ...we're talking about how to use these tools to sharpen our ability to select only the best trades and leave the rest to those mentioned above ..let them pay us to take a risk ..in other words we become the house on a probability basis...seriously I think you are in danger of letting your bias worn underskirt show ;)

Cheers
 

ducati998

Experienced member
1,193 68
CHUMP

I'm surprised to read this from you.....at the very bottomline trading is all about a psychological numbers game and both FA and TA are simply organisational tools for helping us to engage in that game ...whether they are effective or not appears to me to depend only on how much understanding the user has of these tools and how to use them ...and for clarity we're not talking about a newbie techie who thinks a ma xover is the holy grail ..or a fundie who thinks a P/E tells him all he needs to know about a company ...we're talking about how to use these tools to sharpen our ability to select only the best trades and leave the rest to those mentioned above ..let them pay us to take a risk ..in other words we become the house on a probability basis...seriously I think you are in danger of letting your bias worn underskirt show
Two things move markets.
Fundamentals, & Emotion, ( or Psychology. )

Fundamental analysis attempts to measure, or value the business underlying the stock ticker.
Technical Analysis attempts to measure market sentiment.

Only under certain conditions do the two forms of analysis blend ( and this is in large part what my article is about )

Therefore, by mixing and matching, you will have conflicting messages, and this will blur the rules in your trading plan. Blurred rules usually result in disaster.

This is not to say you cannot master both techniques, and employ them seperately in different trades...........say trade GOOG as a technical, and NEN as a fundamental.

I would never trade GOOG at the current price with a fundamental viewpoint.
If I were to, I would be SHORT, but hell if it's gone to $299 it could go to $599, or $899 who knows, so I just stay well away.

For MrCharts to claim a Fundamental calculation, or input, was a component of an intra-day scalping trade is just absurd. A complete nonsense.

Cheers d998
 

SOCRATES

Veteren member
4,966 134
ducati998 said:
CHUMP



Two things move markets.
Fundamentals, & Emotion, ( or Psychology. )

Fundamental analysis attempts to measure, or value the business underlying the stock ticker.
Technical Analysis attempts to measure market sentiment.

Only under certain conditions do the two forms of analysis blend ( and this is in large part what my article is about )

Therefore, by mixing and matching, you will have conflicting messages, and this will blur the rules in your trading plan. Blurred rules usually result in disaster.

This is not to say you cannot master both techniques, and employ them seperately in different trades...........say trade GOOG as a technical, and NEN as a fundamental.

I would never trade GOOG at the current price with a fundamental viewpoint.
If I were to, I would be SHORT, but hell if it's gone to $299 it could go to $599, or $899 who knows, so I just stay well away.

For MrCharts to claim a Fundamental calculation, or input, was a component of an intra-day scalping trade is just absurd. A complete nonsense.

Cheers d998
This is another fabulous assortment of pronouncements you have made here, ducatty, and another one for my pinboard....Marvellous !
 

Rhody Trader

Senior member
2,620 265
ducati998 said:
Two things move markets.
Fundamentals, & Emotion, ( or Psychology. )
Actually, buying and selling are what move markets. One could even say that the intent to buy/sell also moves markets in that the bid/ask (which exists in every market) is a reflection of transactional intent.

What I think you mean is that fundamentals and emotion (psychology) lead to buying and selling (or the intent to do so). They do, but so do technicals (among other things). If I am employing a break-out strategy, then my buying/selling is technically driven. Could it be that the price move creating the break-out is fundamentally and/or emotionally driven? Absolutely. But my contribution to the mix (as small as it might be) is not. And given the number of technical trader around, one has to include that in the mix. That is why technical analysis is sometimes referred to as self-fulfilling.
 

ducati998

Experienced member
1,193 68
Rhody

What I think you mean is that fundamentals and emotion (psychology) lead to buying and selling (or the intent to do so).
Indeed.

They do, but so do technicals (among other things). If I am employing a break-out strategy, then my buying/selling is technically driven.
And you would seem to be arguing that the "Breakout" could be caused by;
Fundamental reasons,
Psychological reasons,

But your technical entry is based on the "pattern".
Thats fine, I can accept that.

That is why technical analysis is sometimes referred to as self-fulfilling.
In which case I also would accept your conclusion.
Cheers d998
 

SOCRATES

Veteren member
4,966 134
Rhody Trader said:
Actually, buying and selling are what move markets. One could even say that the intent to buy/sell also moves markets in that the bid/ask (which exists in every market) is a reflection of transactional intent.

What I think you mean is that fundamentals and emotion (psychology) lead to buying and selling (or the intent to do so). They do, but so do technicals (among other things). If I am employing a break-out strategy, then my buying/selling is technically driven. Could it be that the price move creating the break-out is fundamentally and/or emotionally driven? Absolutely. But my contribution to the mix (as small as it might be) is not. And given the number of technical trader around, one has to include that in the mix. That is why technical analysis is sometimes referred to as self-fulfilling.
Your reply is sincere and well meaning. The problem is that this is precisely what he does not want to hear, so I advise you not to persist. He is likely to come back and start arguing with you endlessly. I tell you this because this is what he tries to do with me, but in my case, I don't engage, I just make my statements, and I stick to them, and that's it.

Kind Regards.
 

RUDEBOY

Experienced member
1,157 6
To be honest Socs, i would say Ducatti is a die hard TA fan? Reason! He does not seem to know his FA that well? RB.
 

SOCRATES

Veteren member
4,966 134
Yes, but I am not telling him anything either., because anything he sees he contradicts, and, I have to go out and trim my hedge now, a huge job, see you later perhaps.
 

Simon Gordon

Active member
126 1
For me investing in the market is the skill of judging expectations, be that using TA or FA.

Andy Kessler sums it up shrewdly in Running Money:

'Stocks are a voting mechanism, pure and simple. They are a collective vote of expectations of each company's future fundamentals. If investors think business will improve, that earnings estimates rise, then the stock is going up. If investors think the end is near, a company is about to roll over, a stock will go down. It doesn't mean that those fundamentals ever happen.'

Scuttlebutting requires an indepth network of specific industry contacts who can act as an early warning system. But the average investor cannot build such a network due to capital deployment constraints.

Looking at a chart is a quick way to see how the voting is going.
 
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