I became interested in the stock market a while ago and have always seen a lot of controversy around TA and FA. Personally, I have used FA in the past and have had decent success with it, I have not returned 30% every year like Peter Lynch, but I have made decent money over the years. I use FA, but because there has been so much controversy about TA, I have researched it and even used it in market simulators in the past. I am going to share with you what I have found using both methods trying to avoid bias towards either of them.

Explaining both methods

Technical analysis uses chart patterns and indicators that attempt to predict the direction an action might take in the future. TA is usually a swing trade of 2 to 8 days) or a short-term trade (2 to 6 weeks). TA also assumes supply and demand, liquidity or volatility, and a somewhat valued price. Fundamental analysis attempts to predict the direction of a stock based on the financial statistics of the business. They are usually long-term operations or investments.

Do they both work?

Yes, I think both methods work. The financial statistics of a company are closely related to the price of a share. When a company produces good profits and income, the share price will increase. Momentum exists in the stock market by creating patterns and indicators that read momentum as an accurate way to predict short-term price movement.

Which is better

FA is best for larger accounts and risk avoiders. Technical support is best for smaller accounts and risk takers. The reason for this is because TA is a faster and riskier way to make money while FA is a slower and less risky way to make money. This is due to the volatility of the shares in TA. Large accounts with high risk will likely cause the owner to shit their pants, even if they are making a lot of money right now. Small high-risk accounts aren’t that bad because it won’t be your death if you lose everything, especially if you’re pumping metals. In prosperous markets like the one we are in right now, TA is probably a better choice because you are less likely to have losing trades and the volatility of stocks in TA generates large winning trades. In middle or poor markets, FA is a better choice because volatility in TA results in large losses on losing trades, while losses in FA are likely to follow the market.

Counterarguments

Many people argue that there are not many successful technical analysts that the average citizen has heard of, while there are billionaires who use FA like Warren Buffet. I don’t think this is a self-test that it doesn’t work or is of significant value. As I said earlier, TA trades in liquid and volatile stocks, these stocks are usually very small, which means that you cannot invest that much money in them without changing the price drastically. This makes it very difficult for wealthy people to use technical assistance and produce exponential returns. Even if someone used TA and was very successful, once they hit the 10-20 million range they will probably move on to fundamental analysis where there are many more stocks to choose from due to the redundant need for volatility. Another reason that successful technical analysts will probably not be known to everyone is because they use systems. A TA system is a system that someone can make that will use TA indicators and tell you exactly when to enter and exit a trade based on those indicators. Once these systems are made, they are so simple that many people have programs and robots that exchange them using the system. Now if someone were to create a system that printed money directly, they probably wouldn’t want anyone to put it in their hands because it would be so easy to use that anyone could do it. Too many people using the same system will reduce its effectiveness, so good technical analysts are likely to be very secretive about their work.

Why do people say that one or the other does not work?

People who say that one or the other does not work or they have not tried the other or they have done it but they have not done it correctly. I’ve seen a lot of articles that say TA doesn’t work or FA doesn’t work, but they don’t even know what it is or how people trade using it.

conclusion

Both FA and TA work and as long as you understand the concept, you will be successful with either of them.

• FA is best for richer people with larger accounts.

• TA is better for smaller accounts.

• Technical assistance will do very poorly in bad markets.