TA vs FA
- Thread starter KGTrader4
- Start date
you can be fundamental daytrader too if you trade the news from the realtime news feed with using key words and so on. If you are fundamental position trader you cannot get higher sharpe than <2. You also can use fundamental data like price and volume data as data input fields with a quantemental approach. You can also use it for filtering. Endless variations here. But if you want high sharpes you need to look for shorter time frames. Otherwise it can take ages until you get rich, speaking of decades here.
I am using technical analysis pretty much, close to 100% in my stock trading. I'm a swing trader/trend follower. A number of traders also, use fundamentals like Mark Minervini. Institutions use fundamental analysis a lot to get into good companies. If you are an investor and your time horizon is that much longer, a technical analysis and fundamental analysis combo would make some sense. I would still use technical analysis and place 80% importance to it. The way I see it, a company that shows good technical analysis patterns would have institutions backing it and sending the stock higher. Chances are good, there is an underlying good reason/s behind it. Say a company is getting bought out and nobody knows for sure and at what price. Relying on the news and fundamental analysis alone, you are behind the eight ball in a matter of speaking. By the time you know it, the stock has probably, gapped up and left you. Technical analysis would give you clues that a stock might be very likely, to make a big move.
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Great answer thanks, smallfil
The market is a discounting mechanism and it has priced in all the information that is available. Fundamental information is generally lagging i.e. reported quarterly. Often times, growth stocks are often with no fundamental and mainly based on analyst expectation and company forecast. Price often reaction to whether the company is able to meet or beat expectation. Generally, for trading then it's TA. For investing, it's FA.
agree with everything you said. But at the same time, I think when I see a stock breaking out of a long tight stage one base, it’s got a better chance of a long stage 2 run, if they are growing revenues, and or earnings at a high rate
Both suck and both are lagging.
If you talk to traders at hedge funds (known as portfolio managers) they will rely heavily on fundamental equity research, positioning, and quantitative insights. The reality is that most trading won’t be round trips in the day, because the driver of small time intervals is flow and that market is dominated by ull-hft.
Finding a unique opportunity with the right risk characteristics opens up the world of leverage which is actually how most hedge funds and such build wealth. If you take $100 and lever it 10x to find a 5% return, you get 50% to your net equity. A strategy with a high sharpe ratio is more suited for leverage, which is why professionals care about that. If you can do this reasonably well, you will raise as much money from your friends and investors as possible (aka launch your own fund), and do this full time.
If you talk to traders at hedge funds (known as portfolio managers) they will rely heavily on fundamental equity research, positioning, and quantitative insights. The reality is that most trading won’t be round trips in the day, because the driver of small time intervals is flow and that market is dominated by ull-hft.
Finding a unique opportunity with the right risk characteristics opens up the world of leverage which is actually how most hedge funds and such build wealth. If you take $100 and lever it 10x to find a 5% return, you get 50% to your net equity. A strategy with a high sharpe ratio is more suited for leverage, which is why professionals care about that. If you can do this reasonably well, you will raise as much money from your friends and investors as possible (aka launch your own fund), and do this full time.
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