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Sunday, June 24, 2007

TA vs FA

Technical Analysis vs Fundamental Analysis. Which is better? As I said before, use a method that suits your personality.

Why I use TA instead of FA?

Well, when I first started investing, actually I tried to use FA. First I rely on the FA reports from brokerage houses, then I tried doing it myself. Bought books on how to do that. But the problem is:
  1. I have limited time, can you do an analysis on 1300 counters in BM?
  2. One cannot rely doing FA from the desk only (i.e. read yearly account statement), you need to talk to the management, competitors etc. Will the management entertain an unknown?
  3. Accounting is not my field of expertise. I thought it was debit/credit (as I learned in my Perdagangan class in Form 1-3). But things can get really creative!
  4. Brokerage houses have access to the management, but they do not always report it objectively. They tend to give a more rosy picture for everything (i.e buys vs sells are a ratio of multiple times).
  5. I'm only limited to Malaysian market.
So I switched to TA. TA works if you are discipline and knows the weaknesses. What I have learned from TA:
  1. There is no silver bullet. Don't rely only on one indicator. You need to combine them.
  2. Use simple indicators because everything are derived from price and volume.
  3. Don't be short sighted, always look at the bigger picture no matter which time frame you are trading in.
  4. Interpretation is an art, you need experience for that. So don't expect quick result in the early stages.
The advantages of using TA is:
  1. Your trading is not only limited to Malaysia, humans behave the same all around the world, so your TA technique works in every market.
  2. You can trade stock, commodity and currency using TA.
  3. Saves you time as TA programs can scan through everything in a few minutes.
That summarizes my opinion about TA vs FA.

4 comments:

zentrader said...

I think FA works best in bear market and TA works best in bull market.

wisdom said...

what i see from all TA & FA blogs, i found that FA works better in both bear & bull market, based on their results that can be seen in their blog

ronald said...

Based on that, yes I agreed with wisdom especially after the existance of samgang blog. cant deny it that his FA works very well lately.

Senq said...

Can't deny sam's been getting the results but to say his method is 'FA' makes me cringe