Fundamental Analysis & Technical Analysis – Food for Thought

In the world of trading and investing, there’s been a constant battle between fundamental analysts and technical analysts. One party says fundamentals are the ones to look for while another party objects and say technicals are the only one needed.

Well, here’s what I think:

In the world of financial markets, trading and investing is like playing the piano.

Your left hand is your fundamental analysis capability and your right hand is your technical analysis capability.

You may just use your left hand and still make great tunes on the piano. The same thing goes with using your right hand only and still produce amazing melody.

However, combining both hands (i.e. fundamental analysis and technical analysis) will most definitely yield you music beyond greatness. And not to forget, consistent practice and continuous studying improves your repertoire.

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Disclaimer: This article is not a specific nor general advice on managing or investing your money. This article does not constitute a recommendation nor does it take into account your investment objectives, financial situation nor particular needs.

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About nadlique

This blog is about the journey of a 28-year-old Malaysian towards financial freedom. This blog was started back when the blogger was 21 years old. However, his journey towards financial freedom had begun way before that. Materials such as investing, business, entrepreneurship, equities, and real estate are presented. The author also posts his thoughts and observations on life in general.

Comments

  1. TA and FA is two difference sch of thought and serve different purpose.

    TA determine the market from the charts, while a FA starts with the Financial statements

    FA takes a long-term approach, often involved looking at data over a number of years to analyse the market, while TA used a much shorter time frame like weeks or even days. Hence, due to the different time frame of both, I would think that the goals of each is rather different. To me, TA is best used for a trade, ie, buy low sell high in shorter investment time horizon, whereas FA is meant to use for long term investment because the whole basis of FA is assuming that the short-term market is wrong, but that the price of a particular counter will correct itself over the long run to its so call “real value”. Real value of the company can’t really materialised over night…

    But you are right, if we can use both together, the results can be a great one. For FA, after analyse a company potential, can use TA technique to figure out the best time to enter the undervalued counter to maximise the long term return. Likewise, TA can look at fundamentals of the counter to further enhance the decision making process.

    Wonder why there are still so many fight between TA and FA supporter? They play different role in their own game in the first place!! Right?

    I am no idea how to use TA method, perhaps is time to learn from you. Any tips?

  2. Actually, TA does not necessarily cater for short-term trades. TA can still be used for long-term purposes. It all depends on the time frames of chart that you use.

    If one plans to hold the stocks for days or even weeks, then that person might use charts of shorter time frames, like hourly, 4-hourly, or even daily.

    There are also weekly charts or even monthly charts that can be used for longer-term outlook.

    Anyway, to use FA for short term purposes is also possible. I’ve done it before. In my earlier days of trading, I relied solely on FA to conduct my trades.

    Whatever it is, in the financial markets, there are literally millions of ways to make money, so really, there’s no right or wrong.

  3. I am very into FA technique into my choice of counter and I have my investment held long term (most of them). FA used for short term? It doens’t work for me. I invested in a counter (not to be named), I reckon the company is undervalued based on its PE, EPF and biz potential (future contract), I made a mistake of not believing in my own choice, and dispose the stock during the market downturn. Well, I am sure you know the ending by now – full of regret! The stock is performing very well now (I am looking at a material loss of opportunity)…..So, my very own conclusion, if i choose a counter based on FA, hold it until the value unlocked. It does take time for the company to unlock the hidden value. It might work for short term but it gives much assurance in longer time frame. Well, what is good, is good in long run!

    Of course, like I say, if i am good at TA as well, it would be of great help in determine the entry point. Mmmm, must start reading up some good books on this.

  4. Raulene says:

    Trying to be a philosophical trader i see 🙂

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