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Monday, April 7, 2014

Why using Technical Analysis and Fundamental Analysis is sometimes confusing:

There is some confusion with regards to using technical and fundamental analysis at the same time. These two are completely different schools of thought. The confusion boils down to this:

Technical analysis prompts you to buy when prices are going UP because it relies on TRENDS, i.e. breakout, uptrend etc.

Fundamental investing on the otherhand prompts you to buy when prices are LOW as illustrated by Warren Buffett's analogy of stocks and hamburgers: "If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef? Likewise, if you are going to buy a car from time to time but are not an auto manufacturer, should you prefer higher or lower car prices? These questions, of course, answer themselves" As they also say, it is only in the stock market that people rejoice when prices have gone up and become more expensive.

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