Think like a fundamentalist, trade like a technician
Hi,
I found an interesting point of view in this article:
http://www.nationalpost.com/scripts/sto ... ?id=302192
While I don't personally believe in technical analysis and chartists (horoscopes and astrology? ), the perspective expressed could also be applied in a broader sense. I would consider it a mix of the two worlds: value investing and something which I call "market reality-oriented". With the later aspect not necessarily associated to daytrading. But related in some degree to market timing, yes.
"Buy high and sell higher" seems to be a more realistic principle than "buy low and sell high" (which works only in theory).
An interesting philosophy IMHO: why consider yourself only from one side of the line - bargain buying (like in a store anouncing sales/discounts) and not also benefit from the other "side" of the situation - make the stuff that doesn't sell well available for others at a reduced price? Something like selling stuff you no longer need on ebay or craiglist.
A combination between Graham/Buffet and Loeb (see "Battle for Investment survival").
So far, I admit that I'm identifying myself with that person buying and buying in order to low the averages And now it made me reflecting a bit, maybe it's not good what I did.
The most difficult things in implementing this strategy would be, in my opinion these:
1. HOW to know that you indeed made a mistake when you decided to buy a particular stock? That is, how to know if the stock has potential value or not - in order to not get "false signals" (noise) for relatively shorter time periods (when we know the market is only a voting machine)?
2. For a stock which let's say proved its value along time, can you really get a benefit by trying to get outside the market when it goes down and re-enter after - by noticing when the big institutional investors make the stock out of favour, or start buying again)? What would be the gain (if this timing could be accomplished)? A gain in time?
3. HOW to know to move in sync with the big, institutional investors? (Related to this, I've recently finished reading a book "Rule #1" making interesing points on this topic).
The bottom line: how to distinguish between a situation where the greedy professional traders intentionally speculate and even drive a market down, and scary the people to sell their stock in panic and thus the professionals will buy those almost for nothing (I'd say in a way they don't deserve, because they didn't really put sweat/work for it) VS. the situation where it's feasible to sell because the stock doesn't prove its value anymore (if many few years ago it proved it) and you wish to correct your mistake in minimum time ("cut your losses short").
Any thoughts?
[P.S.: I consider the "market reality-oriented" view very nicely expressed by the last sentences from that article: "The most important principle is that price trumps every other consideration." "Price trumps value, price trumps economics, price trumps everything. Price tells you whether you're right or wrong."]
I found an interesting point of view in this article:
http://www.nationalpost.com/scripts/sto ... ?id=302192
While I don't personally believe in technical analysis and chartists (horoscopes and astrology? ), the perspective expressed could also be applied in a broader sense. I would consider it a mix of the two worlds: value investing and something which I call "market reality-oriented". With the later aspect not necessarily associated to daytrading. But related in some degree to market timing, yes.
"Buy high and sell higher" seems to be a more realistic principle than "buy low and sell high" (which works only in theory).
An interesting philosophy IMHO: why consider yourself only from one side of the line - bargain buying (like in a store anouncing sales/discounts) and not also benefit from the other "side" of the situation - make the stuff that doesn't sell well available for others at a reduced price? Something like selling stuff you no longer need on ebay or craiglist.
A combination between Graham/Buffet and Loeb (see "Battle for Investment survival").
So far, I admit that I'm identifying myself with that person buying and buying in order to low the averages And now it made me reflecting a bit, maybe it's not good what I did.
The most difficult things in implementing this strategy would be, in my opinion these:
1. HOW to know that you indeed made a mistake when you decided to buy a particular stock? That is, how to know if the stock has potential value or not - in order to not get "false signals" (noise) for relatively shorter time periods (when we know the market is only a voting machine)?
2. For a stock which let's say proved its value along time, can you really get a benefit by trying to get outside the market when it goes down and re-enter after - by noticing when the big institutional investors make the stock out of favour, or start buying again)? What would be the gain (if this timing could be accomplished)? A gain in time?
3. HOW to know to move in sync with the big, institutional investors? (Related to this, I've recently finished reading a book "Rule #1" making interesing points on this topic).
The bottom line: how to distinguish between a situation where the greedy professional traders intentionally speculate and even drive a market down, and scary the people to sell their stock in panic and thus the professionals will buy those almost for nothing (I'd say in a way they don't deserve, because they didn't really put sweat/work for it) VS. the situation where it's feasible to sell because the stock doesn't prove its value anymore (if many few years ago it proved it) and you wish to correct your mistake in minimum time ("cut your losses short").
Any thoughts?
[P.S.: I consider the "market reality-oriented" view very nicely expressed by the last sentences from that article: "The most important principle is that price trumps every other consideration." "Price trumps value, price trumps economics, price trumps everything. Price tells you whether you're right or wrong."]