Is Fundamental Analysis Somewhat Useless?

[oldtime]

Quote from Opulence:

Commodities.

how the heck do you trade corn without at least having some kind of fundamental knowledge of rain? I suppose you could put some guy in a sealed room with only a real time chart and not tell him what he is trading and he could make some kind of a prediction based on chart patterns. But to me, it would be a lot easier to have just said, "It's going up because it's not raining."

the problem with fundamentals is the dissconnect with price.

for instance, drought=higher prices, but at some point the price is so high that the whole crop would have to be wiped out to justify it.

 

[JackDogII]

Quote from Opulence:

This is something I've been wondering since I started trading. I remember a guy telling me a while ago, actually a few guys telling me that they didn't bother looking at the Fundamentals because by the time the outsiders find out about it, that information has already shown up in the prices. I see what they mean because every time some fundamental news is reported, its always after the fact. Don't get me wrong, I fully understand that government reports, political events, natural disasters, etc. can move a market and blow through a T/A system.

What do you all think? What's the consensus on this subject?

P.S: Trolls, get a life.

Largely, it depends on your time frame.

In all time frames, the movement of price is motivated by buying and selling in the market place not by some algorithm's estimation of value.

The products of most calculations of fundamental value do not chage during a single trading session.

It is however, for sure that the price does indeed change during a single session. It is the surges of buying and selling volumes during the session that produce the surges in price.

Jack

 

[Opulence]

Quote from oldtime:

how the heck do you trade corn without at least having some kind of fundamental knowledge of rain? I suppose you could put some guy in a sealed room with only a real time chart and not tell him what he is trading and he could make some kind of a prediction based on chart patterns. But to me, it would be a lot easier to have just said, "It's going up because it's not raining."

the problem with fundamentals is the dissconnect with price.

for instance, drought=higher prices, but at some point the price is so high that the whole crop would have to be wiped out to justify it.

I made a few plays over the summer based on fundamentals. It was hot as hell this summer in the Midwest, so it was obvious that corn and wheat prices would rise, so I made those plays. Commodities that are mainly produced in America are easy to get fundamental data for. Its things like Cocoa and Sugar that I have trouble with.

 

[Digs]

This is the answer...

You put $1000 into a stock broking account

You buy Stock

Thats called MONEY FLOW

The reason why you put money into the account is called sentiment

Follow anything that helps you with sentiment and money flow..

The end

 

[oraclewizard77]

Fundamental analysis is more useful in longer term trades. For example, I know that a stock is in the next few months going to release phase III data on a new drug. I don't know the exact date, but I have a general idea. I then look at phase II data, for example was anyone cured, did anyone have severe reactions including death. I then can either go long the stock and buy put options. Or just buy calls and puts.

If by reading the information from the phase II data, I have more bias to a long position, I can buy either more stock or call positions instead of using a perfect hedge. I will also look at cost analysis of which future month option costs are less expensive including if it is worth buying a deep in the money call which while more expensive to put on the position will give me a greater profit potential if my trade works out as expected.

For shorter term trading, I still don't mind looking at recent news reports, but usually the market will move faster than you are able to review the report, however, if the report is strong enough to create a trend, it may give you a reason to get long or short later in the trade.

 

[oldtime]

Quote from Opulence:

I made a few plays over the summer based on fundamentals. It was hot as hell this summer in the Midwest, so it was obvious that corn and wheat prices would rise, so I made those plays. Commodities that are mainly produced in America are easy to get fundamental data for. Its things like Cocoa and Sugar that I have trouble with.

I hear ya, the good thing about ags is, you are really only dealing with one season. In most cases demand is pretty constant and could probably be traded with just TA. But supply is what it is, there is no doubt about it. And it is not going to pay any attention to what the chart says. Once one of those commodities gets hot, no one is even trading the commodity anymore, they are trading what traders are going to do. I don't trade corn anymore, for one thing these days with the big commodity funds, sometimes the most important knowledge is when GS is going to buy or sell. And it usually has nothing to do with their silly fundamental reports.

 

[Swan Noir]

Anyone who was long Lehman after Bear Sterns went out needed to have their head examined. There was probably going to be another (not necessarily bankrupt but close) and Lehman was the wounded one.

Fundamental analysis can have value for the patient ... not for me ... lol.

Quote from vicirek:

Enron , Lehman etc. .... all with great fundamentals to the last moment before bankrupt.

 

[brokerboy]

its what the big boys decide that's whats important and that will never change. they are not aloud to be wrong because they work as a team and the government bails them out if they are wrong anyway.

 

[wrbtrader]

Quote from Opulence:

...that information has already shown up in the prices. I see what they mean because every time some fundamental news is reported, its always after the fact...

Quote from Opulence:

I made a few plays over the summer based on fundamentals. It was hot as hell this summer in the Midwest, so it was obvious that corn and wheat prices would rise, so I made those plays. Commodities that are mainly produced in America are easy to get fundamental data for. Its things like Cocoa and Sugar that I have trouble with.

I don't get it. First you're wondering if fundamentals has merits and then you say it helps you trade Corn and Wheat. Yet, you're having problems with Cocoa and Sugar. Thus, it seems like you're blaming fundamentals in error based on the fact you don't have access to fundamentals involving Cocoa and Sugar while you have access to fundamentals for Corn and Wheat. :eek:

Seems to me the real issue is that you're having problems getting access to fundamental information in a timely manner that would help you trade Cocoa and Sugar.

Forum question - What's up with these types of threads lately in 2012. I see traders wondering if something is useful or useless but they state themselves that it helps with their trading. Folks, it's simple, if it works for you...keeping using it and stop worrying about what others think. If it doesn't work for you, get over it and move on to something else or find another occupation (career).

 

[Eight]

Fundamentals don't take into account the business cycle. Where the economy is in the business cycle [lasts about 7-12 years really] greatly affects 1) what sector is hot/not 2) the overall index prices

I had access to a very good, very large, index of fundamentals of all sorts once. I never found even the least bit of it that was of any use for daytrading. I tried relating it to the issues with the most volatility vs the least and all sorts of things and came up with nada.