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Speculation Involves An Educated Guess

Fundamental Analysis is complemented by technical analysis.

 

You can be right on the event, and wrong on your market timing, and still lose money.

You just shorted a stock. Your research showed what you believe are flaws in their business plan, reality has to catch up with them.

Market timing teaches us that inevitable very seldom implies immediate.

A stock does not know you bought it. Their business plan may have been flawed for a long time; the stock may continue to go up.

The markets can be wrong for a very long time. If you review popular fundamental analysts from prior decades you will find them fixated on metrics that still exist but are no longer followed.

The obvious value of "eyeballs" to analysts in the late 1990s has been replaced with other metrics. Foreign trade balances may be watched closely one decade and ignored another.

Grahmm and Dodd still works, but as you get further from individual companies - inaccuracies and false assumptions compound.

If the markets tide is up, even old hulks will rise - until they start sinking.

It seems inevitable that the stock will tank, sometime. It seems inevitable that those who play the stock's fall properly will make money.

What is not inevitable is that it will happen now, inevitable is not necessarily immediate. Just because you are ready does not change reality.

That is the power of technical analysis. Technical analysis can show you when a move is imminent, and give you a tool that will tell you quickly if you were wrong.

You will frequently be wrong.

The value of technical analysis then is in discovering an entry point where being right has a large reward, and being wrong is discovered quickly for a small loss.

That button on the left for EWT will lead you to one form of technical analysis, Elliott Wave Theory, that may be valuable if used properly.

 

That is only one tool in a personal tool box that should have drawers for both technical and fundamental analysis.

 

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