Wall Street = Casino. Minus Sum Game.

[Mr. Charts]

Glad you like it - I learnt a lot of it from you !

You could look at it 2 ways Richard...

1 - A pheonix rising gloriously once again from the flames.
2 - That dirty 1 pence piece you keep trying to palm off on the local newsagent but always get back in your change.

I'm comfortable with either description !

I'm flattered
Having read the thread link in your signature just before open, I can't think why I was struggling to guess who you were.....it's blindingly obvious now I've read it !
Great photos you sent a couple of months back
Kind wishes,
Richard

 

[montmorencyt2w]

I'm sure thats exactly the sort of riduculous claim that Robert Pretcher might actually make. The majority contributing to this thead really do need to read some Nicholas Taleb

I've read both of his well-known books, plus a similar one by his friend Mandelbrot, and I don't quite see your point.

I don't share Prawn's rather narrow definition of Fundamental Analysis, probably because he seems to be only talking about the stock market(s), while many of us here are probably talking about the markets in general....FX, commodities, bonds, whatever.

TA is essentially the skill of charting, and of course you can use discretion about it in one sense, meaning e.g. you calculate the probabilities of a price pattern developing the way you expect, and choose to enter, or not to enter a particular trade with a particular stop level and particular exit points.

Or you can use discretion in a wider sense, taking account e.g. market sentiment, political developments, bond yields, inflation, the fact that a certain person is about to speak and what the whisper is about what he will say. I would think of all the latter as "fundamentals", with a small "f" if you like, whether or not it fits Prawn's strict definition. I actually prefer Laidi's term "Intermarket Analysis".

 

[montmorencyt2w]

I'm flattered
Having read the thread link in your signature just before open, I can't think why I was struggling to guess who you were.....it's blindingly obvious now I've read it !
Great photos you sent a couple of months back
Kind wishes,
Richard

I didn't think to look at his signature link before, and now that I have, I still don't know who he is, or once was, maybe because I am not a stock person. Pity, as it looks interesting, but for the time at least, I have chosen to specialise elsewhere.

 

[zupcon]

That would be my take on it too.

You dont need to use discression, pure TA is more than sufficient. That is simply a fact

 

[Splitlink]

You dont need to use discression, pure TA is more than sufficient. That is simply a fact

I didn't use discretion this morning. Pure TA. Lost 30 points.

 

[Prawnsandwich]

Actually - I agree with people making 'lost' of money from TA. That's the problem..

Wont bother commenting on above......

There are thousands of pieces of information that can be used to make a trading decision. I put them into 2 categories. Technical Analysis and 'Everything else'. The everthing else, I also call 'Fundamental Analysis'. .

Well your definition of Fundamental Analysis is not the accepted industry definition, and appears to be more related to news / company events.

Another more detailed definition of FA :

http://stockcharts.com/school/doku.php?id=chart_school:overview:fundamental_analysis

A company coming to the end of it's lock-up period is part of fundamental analysis but has nothing to do with price-earnings, price-book, debt to equity etc. It is simply a moment in the life-cycle of the company where things change..

No its not part of Fundamental Analysis - its a news / company event.

As far as tehnical analysis goes - there are 3 parameters that are generaly used and thousands of ways that these pieces of information are manipulated. Still - it's the same data.

- Volume
- Time
- Price

As far as 'everything else' is concerned we have
- market participant information
- scheduled announcement information
- insider activity information
- news
- company financial information
- company life-cycle information
- product release/approval/patent expiration
- industry information
- economic information (employment, inflation, interest rates, inventories, retail sales etc)
- index re-balancing

The list goes on & on (and to be honest, so do I).

Now - in a previous post,you stated that to use fundamentals you would have to effectively know everything about a company. This is very far from the truth. Depending on what you trade, you need to know different things...

Thats not what I said. In response to your saying that you should put yourself in the shoes of the people in a company making decisions & understand how their own self interests would sway things I said the following :

"How can you put yourself in the shoes of people making decisions in a company when you might have no clue about how that company operates or the industry etc...do you have to become an expert to fully understand the sector / company / industry ? "

Your state I 'categorise' information incorrectly. I see that as a compliment. My argument is there is no need to categorise information as all information is pertinent to making a decision regardless of which camp it falls into.

Nope ...not once did I say that you "categorise" information incorrectly - what I said was that you were confusing fundamental analysis with taking account of news / company events. Refer to definition in link above. When using TA you should take account of news / company events in any case.

I would further add, that once you take a dogmatic approach and fit yourself into one of the camps and then defend it's pure use in denial of all other information, you have sealed your fate..

The point is that Fundamental Analysis and Technical Analysis are two diametrically opposed philosphies on how to approach the markets....Taking account of news and company events does not constitute Fundamental Analysis according to any generally accepted definition. I did say that I stayed out of market during news / company events so clearly I'm not suggesting "denying all other information"

people do pure TA because it appears to offer a short cut. Then the short cut becomes a long route to nowhere.

No people "do pure TA " because its effective and makes money....you just seem to be in complete denial about this...by pure TA I mean without any aspect of accepted definition FA

I think its a dangerous route to combine a mixmash of pseudo-FA with TA, as it is only likely to over complicate things and lead to confusion....

The main point of the argument is that you appear to be in denial that people can make money using TA without FA ....even when there are posters on this thread confirming that that they do....apart from the various other well known posters on the site....

 

[Prawnsandwich]

My specific use of it came from Gary Norden's book, already referred to, but it's one of those numbers you see from time to time, not quite as frequently as the number traders who lose. (Well, 90, 95, whatever....).

Seemed like a high number.......

Im sure many are looking at fundamentals, eg earnings and many are probably not using any proper system apart from what they hear / see on Motley fool, yahoo finance CNBC etc...or are just gambling

Traders that use TA and are failing are not using it correctly..or or are not exercising money managment or probably just dont understand what it is...as as evident from this thread..

Yes, criticism of traders is something that Gary Nordern picks up on. People find TA doesn't work for them, but they are told that it does work, so obviously it's they who are at fault, or their psychology is all wrong - they need to be in "the zone"..

Surely its only common sense and fair to say that the hordes of newbies, as well as some experienced , who have 20 types of indicators on their charts....or who focus solely on oscillators with no attention to price...or who dont use money management / stops etc...are using TA incorrectly....?

And which bit of TA is going to tell you it's about to reverse, and/or whether that reversal is a minor turnaround, or a major reverse? I know some tricks that are supposed to tell you, but how many times do they actually work out in practice?
That's the area that Gary Nordern talks about and he quotes the statistics for some of them.

I posted a link from Trader Mike earlier in the thread that predicted the liklihood of a top in the markets....

All of it - including double tops / support / resistance / volume / MACD / pin bars / trend lines / moving averages etc etc ....the more confluence the better ....its really not that complicated

 

[Prawnsandwich]

I didn't use discretion this morning. Pure TA. Lost 30 points.

You must not have been using it correctly ...

 

[Prawnsandwich]

Tom has said on many occasions that there is a fair amount of discretion involved in his own trading. This is why a newbie cannot just take what he perceives to be Tom's style of trading and make it work the same. I have become convinced that Tom and people who like him appear to trade an essentially technical method are using far more than TA in their own trading, essentially by virtue of their long experience and their knowledge of how the markets work together. .

So your saying that in order to use TA effectively, it requires some work and experience ? And that a newbie who takes up any particular method might not be able to get it to work for him straight away ??

With all due respect, you have ~50 posts and you haven't put a Bio in your profile, and I don't know your trading history.

Well look Ive no interest in making up stories ..what use would that be..all I can say is that TA works very well for me..I'm not the only one

 

[Prawnsandwich]

DT was talking about stock markets - thats why I was referring to stock markets....

 

[zupcon]

I didn't use discretion this morning. Pure TA. Lost 30 points.

Thats completely irrelevant, but tell yourself your one trade closer to a win if it helps

 

[Prawnsandwich]

One interesting point.

TA purists say that everything is built into price.
They will then say that of course you stand aside during earnings & economic announcements.
But apart from that - everthing is built into price.

Not correct - Efficient Market Theory, not TA.... states that all known information at any given time is built into price.... if this held through, then TA would be negated as it would be impossible to beat the market..

http://www.investopedia.com/terms/e/efficientmarkethypothesis.asp

TA purists say that TA can pick up events which are not yet public knowledge such as upcoming positive news, insider buying , good earnings etc

Of course we're not talking in absolute terms ......not "always"....

 

[DionysusToast]

The whole point of this thread is that there is an entire industry out there 'teaching' you how to trade/encouraging you to trade too much. The industry consists ALMOST entirely of people that can't trade. It's an industry designed to suck money out of investors/traders.

With that in mind - why would I pay attention to anything on Investopedia which is a part of that industry ? Do we think it's run by people who trade succesfully every day ?

Also - if only technicals are needed - why are people so keen to tell me I can't be using Fundamentals (i.e. non technical data) properly because it doesn't fit some internet definition ? It's all outside of technicals and therefore it's all useless in the eyes of someone taking a dogmatic technical approach. Still - is it that if I don't follow one religion, I need to follow the other ?

How would we consider the weather as a piece of tradeable information ? Again, I'd say it's fundamentals but again doesn't fit that Investopedia approach (not that I read it).

It's pure dogmatism. It's bordering on religion.

Can't I be a Muslim & a Christian ? You know - eat a bacon sandwich on Christmas morning but still have 4 wives ?

Seems I'm also being accused of using Witchcraft too !

 

[montmorencyt2w]

DT was talking about stock markets - thats why I was referring to stock markets....

In his first posting to this thread, he was talking about "The Financial Industry", and gave examples, e.g. IPOs, then Mutual Funds, and then went on to talk about brokers, training courses, etc. I assumed his argument was the gamut of trading that tends to get talked about on T2W, a lot of which has little directly to do with stocks.

 

[DionysusToast]

In his first posting to this thread, he was talking about "The Financial Industry", and gave examples, e.g. IPOs, then Mutual Funds, and then went on to talk about brokers, training courses, etc. I assumed his argument was the gamut of trading that tends to get talked about on T2W, a lot of which has little directly to do with stocks.

Indeed - it's really one and the same issue.

Think of the financial services industry (I'm not allowed to call it Wall St because of the anal retentives) as a bucket of water.

Now think of who's putting in all the water. The financial services industry keeps scooping bits of water out and having a drink whilst telling us that at the end of the year there will be more water for everyone.

Now - when you get into the teachings of "McGraw Hill", "Wiley", your brokers web site, investopedia, web sites, dodgy vendors etc. you have to remember that they are there to take a little water out of the bucket for themselves with the promise that YOU, YES YOU will have more water at the end of the year whilst all the other schmucks go home thirsty.

In these teachings, there is a common thread. That is to put nice, safe boundaries around a topic. This gives you a finite amount of things to learn and which to use to make a decision. This in turn gets you filling up the bucket sooner.

With this in mind, I see my view of fundamental analysis as good as anyone else's because I don't see things as having to be finite/mathematical. I guess it's the difference between wanting hard science to trade off as opposed to developing the skill to treat every scenario differently.

So - when a company spins off a subsiduary, loading it up with debt yet still keeping a large share for themselves and their C-level execs, on the surface the leveraging make it appear a bad deal. On the other hand, the parent company retaining a large ownership means they have a vested interest in it and this warrants more investigation that many won't do because the debt scares them off. This is fundamental analysis. It involves looking at a balance sheet (actually an SEC Form 10 and a pro-forma balance sheet/P&L) but it also involves looking for spin-offs, understanding some very basic info about SEC filings. It involves considering what the institutions holding the parent company will do with the new shares in the spin off they will be given.

Now - of course, this is not in investopedias definition of Fundamental Analysis and you know what - that suits me just fine. Maybe you want to call it 'opportunity analysis' or 'investment analysis'. It's just a little niche corner of the market. I think it's probably easier for someone totally new to learn something like this than to go through all that TA crap.

The problem is - if it's the labels people are hung up on... they may want to go back to the bucket analogy and understand who labels the bucket.

 

[montmorencyt2w]

Chosen more or less at random from another thread:

http://www.trade2win.com/boards/forex-discussion/85722-cable-2010-a-18.html#post1039960

Don't know what he's said yet but it looks like it went down well

So many times you sit and wait for the perfect entry on the technicals, and that was a good spot, then the news comes and messes it up. Good if you get in. Bad if you don't, or get slipped.

Point is, if you are looking at more than just the technicals, and have one eye on the calendar, you know that something is going to happen. You may not know for certain which way it is going to go, but you can have a bias based on wider knowledge.

As for "avoiding the news...", well there are data releases almost every day, or events of note. I don't think you can avoid the news, except perhaps by avoiding trading altogether.

 

[FSBS]

If the market was efficient then why do economic releases spike prices or cause a shift in direction/momentum.
LTCM anyone.

Admittedly I'm just a learner but as far as I can see the only thing efficiently priced into the market is current sentiment and not any economic reality etc and sentiment can change at any given moment. Black swan this, black swan that... Obama took 500 points off the Dow with some smack talk the other day and everyone should have seen that coming.

Then again I lose money so I'm not really the guy to listen to.

 

[robster970]

Sometimes news increases volatility as people try to trade the news for a quick profit and afterwards it settles down, usually back to where it started.

Other times there is a genuine correction of price based upon the market believing that the fundamental value of the security has changed. Value traders get in first to exploit the change and then others follow suit and momentum builds up.

So it is efficient. You just need to evaluate over what timeframe it is efficient and whether you can take advantage of this.

 

[FSBS]

Hmm I see what you mean. I think I've been thinking of an efficient market as comparable to a supercomputer, like it should smooth out things like corrections etc through pricing in all possible outcomes through all markets and derivatives. I tend to over think things sometimes lol.

As for what you're saying I can how it is efficient it is in terms present/market value but efficient in pricing in true economic reality over the beliefs/actions of the larger participant... not so sure.

Think I might find a book on this... quite interesting. Will probably be hard to find one that just states facts rather than just preaching the author's dogmatic views lol.

 

[robster970]

Somebody posted up here recently that in the short terms it is a voting machine but in the long term it is a weighing machine. I thought this was a very succinct way of describing markets and their behaviour.