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Friday, 3 February 2012

Fundamental versus Technical analysis – Final part 3 of 3


The Moon

Let me us a Buddhist analogy to illustrate why some people are better at using Fundamental analysis to make profitable investments.

Published accounting statements, brokerage reports, company’s spin (opps, I meant presentations), media commentaries, and so on are akin to the finger pointing to the Moon.
The finger is not the Moon. It merely helps the viewer to locate the Moon.

If we want to study the Moon, we need to observe at the Moon directly. But some students of Fundamental analysis never looked beyond the finger of the person to whom they have asked, “Where is the Moon tonight?”

And we wonder why we fall into value and high dividend yield traps… Cheap and junk are not the same thing! 


The Reflection of the Moon on the water

Using another Buddhist analogy, Technical analysis is like looking at the reflection of the Moon on the water.

Many rabid Moon-chasers have dived and drowned in their attempt to “fish” the Moon out of the water; mistaking the reflection for the real thing...

Fishermen who lived by the water calmly dry their net during the day and patiently wait for the right weather conditions before going out to sea.

Using wisdom handed-down through the generations, they look at the cloud patterns; feel the wind’s strength and direction; observe the rising ebbs and flows of the tides; and recollect the previous night’s night sky before boldly venturing out to sea.

There is bounty in the sea; but you want to make it back alive too!
  
That’s where Moon-chasers and fishermen differ.

Moon-chasers can’t let go of their obsession of the Moon – their “why” questions betray their Fundamental roots…

Fishermen don’t know or care for the “whys”. They just “know”. When the right weather conditions appear, they go fishing!

Those fishermen who are interested in the “whys” would have gone for their Phd in Meteorology – and they are called weather forecasters.

Weather forecasters don’t fish; they make a living selling their predictions. 


Everyone loves a winner!

It’s not important how we make our buy/sell decisions. What’s important is that we make MONEY!

If we don’t make money, both the Fundamental and Technical schools will probably distance themselves from us. What an embarrassment we are to them!

If we make money, even if we never studied at their schools, they will probably trip over themselves to offer us their “honourary Phds”!

Well, once upon a time, people believed there’s such a thing as Phd in Options Trading. Finger watchers…

Nothing is free. We probably have to agree to have our photos taken and used in their next promotional materials. Spin!

17 comments:

  1. yes! I am the first to post! I am honoured!

    SO what kind of moon do you usually look at?

    ReplyDelete
  2. Yes, many people are looking at the finger/reflections instead of the moon. Fundamentals are just the way of expressing the market sentiments, it is only the finger/reflection, not the moon itself. What you cannot see is the greed and fear moving the prices moving up and down.

    You can only see this market greed and fear when you don't have greed and fear in yourself first.

    Greed and fear comes from human thoughts which dosen't exist, so don't spend so much time searching for it.

    When you don't see the greed and fear in you, you'll start to see the money. But first, you need to think of money as just paper only.

    When you see money as just paper, then you can start to trade/invest.

    If you skip the stages I highlighted, you'll forever remain as a gambler and lose money.

    Try it.

    ReplyDelete
  3. What is the moral of story after 3 espisodes?

    Time to take up fishing as hobby?

    ReplyDelete
  4. OT83,

    Now that I am vested with my defensive moons, I am looking at the cyclical stars. But first must wait for the other shoe to drop.

    But the other shoe just gave me a slap in the face and flew up, up, and away...

    LOL!

    P.S. Gravity is my friend. I wait. Meanwhile, I dream of stories and write poke poke postings!

    ReplyDelete
  5. Anon 7:27,

    I hear the wind from the rustling of the leaves.

    I see the wind from the flying of the flag.

    I feel the wind as it caress my cheeks.

    Like the wind, a fellow traveller of the way came and went.

    I looked at the lotus flower in the pond and smiled.

    ReplyDelete
  6. CW8888,

    LOL!

    I think fishing is another great analogy to trading and investing.

    I better leave that story telling to you! It's right up your alley ;)

    I'll stick to my "wind moon".

    Cheers!

    ReplyDelete
  7. Hi SMOL,

    Thanks for the article. I realised that we never ever did a link exchange? May I have the honour to do a link exchange with you? Have placed your blog on my blog roll.

    ReplyDelete
  8. Thanks FF for linking my blog at your site!

    Your blog has been at my "Where I borrow with Pride" for the longest time ;)

    You were amongst the early bloggers who commented on my blog when I just started out. And I appreciate it!

    ReplyDelete
  9. smol, gravity is the weakest force in the universe. your friend?

    ReplyDelete
  10. if everyone loves a winner, then i must be an exception. though i try very hard to accept it.

    nothing is free? everything should be free. our universe came out from nothing, is free for everyone to take.

    it not free cos you feel you own it, me too.

    ReplyDelete
  11. so can we have a clear summary or conclusion of all the 3 parts? i catch no balls haha.

    ReplyDelete
  12. Coconut,

    1) Gravity is my friend; it keeps my feet firmly on the ground. Although I try very hard to soar!

    Smol man don't need strong forces. Got force can already!


    2) Yup, what's yours is mine, and what's mine is mine! That's the history of Man. From Kingdoms to Empires, from Communism to Capitalism.


    3) If universe came from nothing, why bother if got balls no balls?

    How? My Zen got fight with your cosmology and physics?

    I kenna smoked by you many times at Fat's blog. Now I know how to speak Coconut!

    LOL!

    ReplyDelete
  13. what smoke? i'm serious. where is the summary (you belong to which camp?)?

    ReplyDelete
  14. Coconut,

    I'm a lazy bum who believes that it's the dog that wags tail.

    Shades of grey.

    Summary is: Don't debate; go make money!

    ReplyDelete
    Replies
    1. Hi SMOL,
      "Summary is: Don't debate; go make money!"
      i like it. Talk is just Talk.(kay cong boh yung). Do it and see the result. Then you know. Hey, after that we talk again. Ha! Ha!

      Delete
    2. Show us the money transparently. We will follow you and wag our tails. LOL

      Delete
    3. Temperament and CW8888,

      We (and everyone else) are like the 8 immortals - 八仙过海,各显神通!

      See you both at the end of the eastern sea!

      Yum Seng!

      Delete

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