Fundamental Analysis or Technical Analysis or Both for Stocks Trading / Investing
It’s been such a long time since I’ve personally written something here in TechFilipino. I was busy with 2 things, my Online Marketing outsourcing, GangVentures.com and analyzing my personal stock picks. These 2 tasks alone have taken so much time (but with plenty of rewards, I didn’t have the time to blog). Anyways, going back to the topic, the question I’d like to ask you fellow Stock traders / investors is what do you personally do? Fundamental Analysis or Technical Analysis or both?
This is my personal opinion and Experiences on Fundamental Analysis or Technical Analysis or Both in Stock Trading / Investing
I was first an Entrepreneur
Before I started investing into stocks, I was an entrepreneur and fundamental analysis was what I did best. So when I started, I went around reading as much as I can about Warren Buffet and watching as many YouTube videos as I can of his talks or analysis of how he invested (And yeah I did get very confused). So when I felt that I was ready I started investing after I’m comfortable fundamentally. As long as the business does well, I always believed the prices will follow.
Then I learned Trading
Buy and Hold was the name of the game, I bought stocks which I felt were fundamentally sound and just thought of holding them on the long haul. But somewhere along the way, I learned about Facebook Groups and read what people were talking about certain stocks gaining more than 10% in a day! (temptation sets in) Low and behold, I became a trader! I started reading thru groups / forums and equipped with my new found source of information, I started, gambling, just randomly buying stocks that was recommended or talked about (and basing my decisions on prices) and loss started to pour in big time (I don’t blame forums or groups, I traded on my own knowing fully the consequences).
Then I started talking to Experts
I remember this one time, I invested in PGOLD and a new disclosure came out with them having 15% higher net profit than the previous quarter but the stock price went down which made me panic on why there’s a negative impact on great news. Wanting to know more, I went and talked to different stock investors / traders, but their thoughts were different, they were Technical Analysts which based their decisions on charts and buyers’ / sellers’ emotions. It was new to me, I was all about the numbers but suddenly there’s someone telling me that it is also based on emotions. So I started to dig deeper learning the basics of it and I was able to understand better what was going on with emotions. This is where I totally understood bulls and bears, which didn’t make sense when I first started. (I personally want to thank TradersLogbook for guiding me thru this and helping me understand Technical Analysis better)
So Technical Analysis or Fundamental Analysis or Both?
When I panicked with PGOLD, I asked Felix from TradersLogbook what’s the better type of analysis. And he gave me the answer that made things really clear: “Fundamental Analysis reflects the price that the stock is going to be, while Technical Analysis reflects how the price is going to get there.” This made things so much clearer in my head, and this is my answer to the question above:
I’d always go for both, I use Fundamental Analysis to determine if there’s still a good margin of safety if I invest today and I use Technical Analysis to determine my entry price and exit price. Stock market is all about valuations, the share prices reflect how much the company is worth today or at least how the market perceives its value. So, in the case of PGOLD, I had a good margin of safety when I entered and when I reached my target price or fair value, I waited for the upward trend (Technical analysis) to reverse and sold my shares. I sold my shares at around P36 (even though my FV or TP was P34) which was still pretty early (as it hit P40+ today) but a profit is a profit and I’m confident not to be whipsawed when stock prices start to fall as “I” (my personal opinion) believe it’s overvalued.
Using both, Technical and Fundamental Analysis, has given me a good system for me to Invest / Trade. And so far I’m up by 25% from when I started in September 2012, that’s including all the newbie mistakes I’ve stupidly done. So I’m pretty happy with my results and I’ll keep doing this.
How about you guys? What worked for you? Which would would you recommend Technical Analysis or Fundamental Analysis or both?