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You are probably thinking "Just great, a series of quotes from famous traders that conflict with one another!" Well as you probably know by now, so what? Isn't flexibility a key requirement for success? Traders employ different methodologies. They all have similar convictions about the importance of empowering beliefs and virtues, how critical it is to control the vices of trading, and the importance of developing their own strategy. Whether you are a technical trader or a fundamental trader, you are still a trader concerned about making consistent profits. |
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In a previous chapter we talked about some of the technical tools that have served me very well over the years. When I first started trading stocks in the mid-1970s, I was a pure technical trader who didn't care one iota about the "funny-mentals." My belief at that time was that all known fundamental information was reflected in the price, in this instant of time. To a large degree I still believe that; however, there are times when the market gets so wound up in its own continuity of thought that nothing matters except that continuity of thought. There is a point, though, where the market gets so hysterical that it needs more "hysterical" traders. The instant the supply of new traders and/or new entry orders slows, the continuity of thought will collapse, along with the market. |
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Answer this question: Are you a technical trader or a fundamental trader? The majority of traders will answer that they are technical traders. The primary reason is that it takes less time to understand how a technical indicator works than to grasp the fundamentals. The human eye is very quick at picking up coincidences where the indicator did this, and the market did that. Consequently most traders buy a computer and get a trading program with all the technical indicators built in, and low and behold within a relatively short period of time they are "expert market technicians"! |
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Becoming an expert on how fundamentals and intermarket relationships might affect price requires an intense amount of study. Heck, there are people who go to college for years to understand the big picture! It is one thing to write a program to perform a mathematical operation on the price, but it is another thing to write a program to include all the different variables that constitute the fundamentals. Whereas the most popular technical indicators are visually appealing and require little thought (to a novice), fundamentals are not visually appealing and require a lot of thought. Much like a Go game. |
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As I have stressed, there is no right or wrong answer in devising a trading methodology. However, it behooves you to understand some of the rudimentary aspects of the markets you are trading. Every single market is |
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