The way that Fool dismisses technical analysis does more harm that you can imagine to the average long term investor. It seems like every few weeks, Fool comes out with a misleading article that labels those who use technical analysis as morons.
In reality, technical analysis is the sole trading strategy used by many hedge funds, Wall St. traders and other pure trading firms. Essentially, these traders make 100% of their profits from short term intra-day to intra-week movements that have almost nothing to do with fundamentals. In the short term, the market is dominated by psychological factors, and technical analysis allows them to take advantage of it. And guess what? It works! That's one way, out of others, that these firms stay in business and make massive profits.
So now you ask, as an average buy and hold investor, I don't have several millions in my trading account, how does this help me? The answer is, if you've done your research on a stock, and you found that fundamentally a stock is undervalued, or whatever your valuation metric is, you look for an entry point, if you can get in at 5 or 10% lower price wouldn't you do it? Over my years of investing, I've experimented with tons of technical analysis methods and found some that really provided me with deadly accurate predictions for short term movements. Am I lucky? Maybe. But the evidence suggests that technical analysis works for its intended purposes and should not be ignored by the long term investor.
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