Where are all the Trading and/or Investing topics showing Funnymentals work ....

longandshort said:
TA is primarily pitched to retail by discount brokers and “educators” (who don’t make a living off their pnl), as a way to induce orders. Fundamental equity research is hard which scares away a lot of retail. Discount brokers would be starving for order flow if they didn’t preach TA. It’s the qanon of trading.
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Stop bashing technical analysis just because retail traders use them!! LOL Technical analysis is not that useless. It's an organized and systematic way of looking at price action. It just needs to be used in the context of fundamental factors. Many technical analysis concepts like the Elliott Waves and Gann systems are based on mathematical phenomenons, the Fibonacci sequence and the stochastic system is based on random probability distribution. Some of the technical analysis indicators like the MACD and moving averages are statistical models. Technical analysis might be "pitched" to retail traders but these are not concepts created out of thin air or are voodoo science. Institutional traders do analyze price action using technical analysis concepts as well.

People don't use fundamental analysis not because it's hard; it's because the timing of its impact is not predictable. The MBS was shit because of mortgage fraud and how long did it take before it finally impacted the market and took the market down in 2008? Michael Burry was able to short the market continuously because he had hundreds of millions of dollars under management. Retail investors don't. And even trading with hundreds of millions of dollars, Michael Burry faced possible lawsuits from his investors because he refused their withdrawal requests when the fund was tanking. Retail investors simply won't be able to do it cuz we don't have that kind of money. We don't have time nor the hundreds of millions of dollars to wait it out while suffering millions of dollars of losses for some fundamental factors to finally materialize into PA for us to profit; we need something quick, something with a good degree of accuracy for us to analyze the PA in order to take trading action, for us to get in, get out, book the profit and done. That's how we trade. Retail traders use technical analysis more because it suits our trading style. We can do long-term investing based on some fundamental factors but that's not going to generate income from trading for us. The whole point of us trading full-time is to generate income on a periodic basis.
 
Overnight said:
Why? Because all the kids that are 6-10 YO now will in 5 years be demanding a smart phone. And there's a LOT of dem damn kids out there. And they are not cost-conscious and thinking of older models...They want the latest-and-greatest iPhone. AAPL is truly a stock to own, not to trade.
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That depends on whether parents are silly enough to allow this to happen. But given the level of education I am seeing all over the place (which includes the US, the UK AS WELL AS other EU countries), I suspect the chances of you being right are high (unfortunately?).

That's why I'm loading up on cyber security. These uneducated little monkeys will dump so much money down the drain that the same lazy parents will wonder what the heck are these kids doing with this very expensive item in their hands? What? You broke the glass again? WHAT? You played the "what's your papa's CC number"???

Ahh. Education. That sweet but fading staple of civilization.

What am I blathering about? Ah yes, ticks..ticks..ticks.. :)
 
TheDawn said:
Stop bashing technical analysis just because retail traders use them!! LOL Technical analysis is not that useless. It's an organized and systematic way of looking at price action. It just needs to be used in the context of fundamental factors. Many technical analysis concepts like the Elliott Waves and Gann systems are based on mathematical phenomenons, the Fibonacci sequence and the stochastic system is based on random probability distribution. Some of the technical analysis indicators like the MACD and moving averages are statistical models. Technical analysis might be "pitched" to retail traders but these are not concepts created out of thin air or are voodoo science. Institutional traders do analyze price action using technical analysis concepts as well.

People don't use fundamental analysis not because it's hard; it's because the timing of its impact is not predictable. The MBS was shit because of mortgage fraud and how long did it take before it finally impacted the market and took the market down in 2008? Michael Burry was able to short the market continuously because he had hundreds of millions of dollars under management. Retail investors don't. And even trading with hundreds of millions of dollars, Michael Burry faced possible lawsuits from his investors because he refused their withdrawal requests when the fund was tanking. Retail investors simply won't be able to do it cuz we don't have that kind of money. We don't have time nor the hundreds of millions of dollars to wait it out while suffering millions of dollars of losses for some fundamental factors to finally materialize into PA for us to profit; we need something quick, something with a good degree of accuracy for us to analyze the PA in order to take trading action, for us to get in, get out, book the profit and done. That's how we trade. Retail traders use technical analysis more because it suits our trading style. We can do long-term investing based on some fundamental factors but that's not going to generate income from trading for us. The whole point of us trading full-time is to generate income on a periodic basis.
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You have some good points however:
  • Use of Fibonacci sequence or stochastic on price is an incorrect application given non-stationary nature of stock prices — it’s like mixing apples with oranges; trend analysis is far more efficient when you transform a series into one that’s stationary— however I would argue that such analysis is “quantitative” as it’s done outside of a chart and you wouldn’t be using simple tools like macd/rsi/etc. (which were probably the best you could do before computing power was large enough for more advanced statistical techniques)
  • On wall st the only people who use Elliot wave or fibs are salespeople. The actual traders who are taking risk base their decisions on analytical edges and information about positioning. And no I don’t mean futures lol, I mean they will literally track fund managers and are constantly asking across the street for info about who is making a trade.
  • Portfolio managers (trading decision makers at hedge funds/mutual funds etc) have teams of analysts conducting fundamental research if they’re trading discretionary

The retail idea of fundamentals, meaning detailed work around cash flow analysis etc, is useless. Historical data is not helpful. At the professional level, fundamental equity research is used as part of a mosaic (in conjunction with positioning, macro aware, quantities factors, etc.).

An example of using that approach in the short term is:
If a stock is trading at a price, you can reverse engineer the market implied earnings. If the market implied is driven by info, you can compare with street estimates to identify where the price may converge to. If the price is not driven by new info, then you could potentially fade it. These types of trades happen all the time and have time horizons within 0 to 7 days.
 
longandshort said:
You have some good points however:
  • Use of Fibonacci sequence or stochastic on price is an incorrect application given non-stationary nature of stock prices — it’s like mixing apples with oranges; trend analysis is far more efficient when you transform a series into one that’s stationary— however I would argue that such analysis is “quantitative” as it’s done outside of a chart and you wouldn’t be using simple tools like macd/rsi/etc. (which were probably the best you could do before computing power was large enough for more advanced statistical techniques)
  • On wall st the only people who use Elliot wave or fibs are salespeople. The actual traders who are taking risk base their decisions on analytical edges and information about positioning. And no I don’t mean futures lol, I mean they will literally track fund managers and are constantly asking across the street for info about who is making a trade.
  • Portfolio managers (trading decision makers at hedge funds/mutual funds etc) have teams of analysts conducting fundamental research if they’re trading discretionary

The retail idea of fundamentals, meaning detailed work around cash flow analysis etc, is useless. Historical data is not helpful. At the professional level, fundamental equity research is used as part of a mosaic (in conjunction with positioning, macro aware, quantities factors, etc.).

An example of using that approach in the short term is:
If a stock is trading at a price, you can reverse engineer the market implied earnings. If the market implied is driven by info, you can compare with street estimates to identify where the price may converge to. If the price is not driven by new info, then you could potentially fade it. These types of trades happen all the time and have time horizons within 0 to 7 days.
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Very interesting.Thanks.
 
longandshort said:
You have some good points however:
  • Use of Fibonacci sequence or stochastic on price is an incorrect application given non-stationary nature of stock prices — it’s like mixing apples with oranges; trend analysis is far more efficient when you transform a series into one that’s stationary— however I would argue that such analysis is “quantitative” as it’s done outside of a chart and you wouldn’t be using simple tools like macd/rsi/etc. (which were probably the best you could do before computing power was large enough for more advanced statistical techniques)
  • On wall st the only people who use Elliot wave or fibs are salespeople. The actual traders who are taking risk base their decisions on analytical edges and information about positioning. And no I don’t mean futures lol, I mean they will literally track fund managers and are constantly asking across the street for info about who is making a trade.
  • Portfolio managers (trading decision makers at hedge funds/mutual funds etc) have teams of analysts conducting fundamental research if they’re trading discretionary

The retail idea of fundamentals, meaning detailed work around cash flow analysis etc, is useless. Historical data is not helpful. At the professional level, fundamental equity research is used as part of a mosaic (in conjunction with positioning, macro aware, quantities factors, etc.).

An example of using that approach in the short term is:
If a stock is trading at a price, you can reverse engineer the market implied earnings. If the market implied is driven by info, you can compare with street estimates to identify where the price may converge to. If the price is not driven by new info, then you could potentially fade it. These types of trades happen all the time and have time horizons within 0 to 7 days.
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Okay, so let's summarize your assessment. You group all forms of PA as qanon nonsense and you believe that retail level FA is useless. So what is a retail trader to do? Buy Vanguard index funds? (Not that there's anything wrong with that.)

Let's say you were a retail trader following one or more non-agricultural futures markets for short term to very short term trades. You didn't believe in Elliot/Gann/Fibonacci, and regarded indicators (MACD, RSI, etc.) as just a house of mirrors. Let's say you also didn't buy into subjective chart pattern analysis because you regarded them as little more than Rorschach tests. What would you do? What would you use?
 
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Frederick Foresight said:
Okay, so let's summarize your assessment. You group all forms of PA as qanon nonsense and you believe that retail level FA is useless. So what is a retail trader to do? Buy Vanguard index funds?

Let's say you were a retail trader following one or more non-agricultural futures markets for short term to very short term trades. You didn't believe in Elliot/Gann/Fibonacci, and regarded indicators (MACD, RSI, etc.) as just a house of mirrors. Let's say you also didn't buy into subjective chart pattern analysis because you regarded them as little more than Rorschach tests. What would you do? What would you use?
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Trading is hard, it is not easy. But if you decide to go down that path, before you even get started trading you'd want to spend some time getting acquainted with the literature. I'll use oil as an example.

There's a large body of research you can read to get caught up on how current market actors are evaluating and forecasting the price of oil: (this is from a Fed paper published over a decade ago)
upload_2023-3-9_7-26-20.png


For oil you have some distinct steps between production and market prices, mainly, production capacity, inventories, and marginal changes in demand. Each step needs to be monitored and you would ideally have some type of model that links the delta of production to a prediction to a delta of inventories and vice versa. Inventory fluctuations are more sensitive to changes in marginal demand ex-bottle necks.

So your building blocks for trading are:
(a) supply/demand imbalances are you table stakes (keeping track of eco releases, having a model that links them all)
(b) must know street views (what's the consensus forecast for oil this q and fy?), rationale, etc. -- this is a proxy of real-time investor positioning
(c) unique insight or view that diverges from the street view

For example:
The context is that global economic growth is expected to ramp up in 2023 driven by Chinese reopening, an improving economic situation in Europe, and a very strong labor market in the US. (This is an example of a so called "narrative")

(Example) Lately, US supply data has improved (oil rig counts, etc.) which has put downward pressure on oil prices as inventories increased. However, street views (Goldman, JP, MS, etc.) are still calling for a super cycle in commodities and higher energy prices.

You do some research and find that Chinese demand is cooling given that the stimulus announced is much less than what was expected... but the impact to global oil demand is not massive; you plug in your new demand per day and get an oil price that would clear inventories -- say it's $5 below current prices. It's not necessarily worth going outright short unless the price moves higher. This is an earned insight... you now have a reason to disagree with street views.

Now you can make a few trades -- you might look at oil futures or options to see how the curve is structured.
upload_2023-3-9_7-39-7.png


Trade ideas:
(1) go outright short spot/current month futures around eco releases IF you have conviction in view; if not, go short after to ride momentum -- ultimately looking to fade all rallies based upon reopening/accelerating GDP views
(2) sell future/buy near as you expect the oil curve to invert further
(3) etc. etc.

You could trade this tactically e.g. around eco releases, or carry a short position until you start to see Street Views revised lower (means info is now priced in, there's no big position on the other side of your trade).
 
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Qanon is a poor analogy though outside of maybe Fibonacci ideas. You can see in that Paul Tudor Jones video from 1987 they were using Fibonacci.

The issue is that in 1987 Intel's top of the line processor was 10 MHz. TA is basically state of the art financial data and time series analysis if you have a 10 MHz processor or just graph paper and a pencil.

So in 2023 you are using state of the art for 10Mhz up against state of the art using petaFLOPS. I mean there is really nothing in our daily lives on that scale to even be able to think about it by analogy.

A moving average is still popular with retail traders because it is so simple it can be understood and plotted using graph paper.


longandshort said:
TA is primarily pitched to retail by discount brokers and “educators” (who don’t make a living off their pnl), as a way to induce orders. Fundamental equity research is hard which scares away a lot of retail. Discount brokers would be starving for order flow if they didn’t preach TA. It’s the qanon of trading.
More...
 
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