No, definately do not trade soley on TA, with one exception which I'll come to later.
Both TA & FA are useful in making investment decisions. If I had to, I would lean more to FA, as I can read a balance sheet, but one should always check the chart.
IMO to just use soley one discipline either TA or FA leaves the trader/investor without the full kit of tools at their disposal.
John Risk pointed out just recently the "fundamentals" of LYC appeared ok while the chart looked terrible.
There are many many other examples over the years.
On a personal level:
One which cost me dearly ( around $400K ) was Bendigo Mining (BDG), where the fundamentals appeared brilliant.
I had smoke coming out my calulator when I projected the share price based on fundamentals and worked out how much my holding would be worth....It was many $ millions. The local newspaper had regular reports on the progress of the decine being installed to access the gold. One could feel the slight shuddering from the regular blasting down below. There were photos of the ongoing construction of the $60 mill ore processing plant. It was about 5 Km from my house, I used to go and look at it. ( Why would they build a $60 Mill plant if they did not have the gold I thought....all VERY logical reasoning ) While all this was happening the chart was going from the top left to the bottom right hand side of the screen. The chart is wrong.....I thought.
Ultimately, BDG reported uneconomic grades. (obviously there were "insiders" who caused the price to fall, but I wasn't one of them !!!)
Like LYC ( which i did NOT own), the chart, not the reported fundamentals, was right !
Of course I've had a lot of success in my 40 + years of investing which outweighs my losses, but the BDG lesson was to always pay attention to the TA as well as the FA.
A general observation on TA
When I started it was hand drawn charts, both point & figure and bar charts. Then doing Wells Wilder calculations on a Hewlett Packard calculator. Nowdays the charting programs have an overwhelming number of indicators and options. But every one of them is just a mathmatical manipulation of the same historic price action ((open close high low volume) in some form or another. There is NO magic or holy grail. All these indicators can do is give you a slight edge, with no guarantees. The same thing applies to patterns, trend lines, support,resistance levels, breakouts etc. Some are more reliable than others, but none work every time. But they can give you an edge. But it can also produces laziness where it is all too easy to press a couple of buttons on the keyboard snd BINGO.......there is the answer. One should always understand the shortcomings of a stock picking system which ONLY uses mathmatically manipulated historic pricing, and understand the difference between trend followin indicators and trend change predicting indicators, which can often give conflicting signals .
Thre bottom line with TA is the KISS principal, and to find something that works for you.
( I do however regard Gann as a load of total crap. But for the Gann enthusiasts..... whatever floats your boat. :>) )
Then there is money management...a whole topic on its own.
And the traders mindset is also something that has to be dealt with........Trading can be quite stressful. Books on the psychology of being a good trader , like "Let the Trade Wins Flow" are worth a read but there are many others.
What is my strategy overall you ask.
Over the years,Ive mainly been a share trader/investor as such.
Ive been an options trader with good success.. mainly selling options which expire worthless to the purchaser. Or buy them back and roll into the next series The problem is the market itself became too thin so I stopped doing it. Done a little bit with futures, and for a few years now since their arrival on the marketof CFDs I have traded them. Just indicies and mainly the XJO (ASX 200)
Was great fun when they were first introduced. The CFD providers did not know how to price them based on the overnight overseas action. For example the DOW would go up say 250 300 points and our market next morning the CFDs would be up 150 200 points or more on our previous nights close. All one had to do was fade it. Our market once it opened would then rise maybe 100 points or more by 10.30-!! Am by which time the CFD would match the market any you could buy your position back for say 50 plus points....times the number of contracts. Same if the overnight o/seas market had a heavy fall... fade it........BUY the CFDs at 150 poins below the previous close. The market would fall maybe 100 points, again for a 50 pt per contract profit (times the number of contracts) Absolute money for jam. My only mistake was I was too conservative with my positions as it was so obvious I thought I must be wrong. Eventually the CFD providers woke up and priced the o/night indicies more realistically so the game stopped working. And I stopped playing it.
So what do I do now:
Very little.
Still buy/sell/trade/hold shares as such but NOT with CFDs No reason other than tradition and inertia on my part.
Nothing magic or special about what I do. And Im certainaly no expert.
A/ I dont need to make any more money. B/ I am adverse to losing the money I have.
Still have very small CFD positions on the SPI based soley on TA ( trend,support,resistance 3 moving averages MACD and always with one rheumy eye on the o/s indicies. Both short & long ...whatever it looks like doing... but only short term...day trading or one or two days. Occasionally take a position on the DAX or FTSE
This purely for my amusement and to keep my head in the game. Right now its too hard to know where it is heading and the risks ( for me anyway) are too great. (Money management)
The trend, maybe perversely, continues to be up, and if I may be permitted to shout to make a point ....................
"FLEMSTER"...
THE TREND IS UP. !!!!!!!
SO WHY DO YOU FIGHT IT BY GOING BIG TIME SHORT ALL THE TIME ??????
An analogy: A trainee surgeon would not start his career with MAJOR surgery until he'd had a bit of minor chopping practice.
If you must, do it with smaller parcels. Money management... risk say 2% of your capital. (Chopping practice) Making $s is less important than staying solvent and learning the game. The trend will change, maybe tomorrow, maybe not for some time and you will be right, but you may well run out of funds beforehand. ( See Ian Sykes) I note by your own admission your LONG position in AWE is keeping you afloat....
Your "LONG POSITION"....Read your own lips :>)
Hope your Melb. seminar is going/went well.
........................ For all of us right now it is a bit of a waiting game and therefore preseving capital (and for some with the training wheels on, learning the ropes) is what should be happening. ...................................................... I note many of you are keen to trade a diversity of markets.
There is always a market with a profit to potentially be made, so the temptation is there to take a position.
But you don't have to trade.
Wait till all the stars line up in your favour, but if they dont there will be another opportunity tomorrow. So be patient.
