Which type of trader performs better? Technician or Fundamentalist?

Excerpts from Mark Douglas

Fundamental analysis(recent news,statistics) has been around for ages even before our grandfathers was born. Technical Analysis(chart interpretation) started out in the early 1980s. Back then,Technical Analysis was considered to be a form mystical hocus-pocus.In short,CRAZY!
Now of course the opposite is true. Almost all experienced trader use some form of Technical analysis to help them formulate their trading strategies while the "purely" fundamental analyst is virtually extinct. What cause this dramatic shift in perspective? Simply because the trading community gradually come to realize that Technical Analysis fulfills their objective profoundly: Getting MORE money!

Fundamental Analysis is the attempt to take into consideration all the variables that could affect the relative balance or imbalance between the supply of and the possible demand for any partcular stock,commodity or financial instrument.Using primarily mathematical models that weigh the significance of a variety of factors (interest rates,balance sheets,weather patterns and numerous others), the analyst projects what the price should be at some point in the future.
Fundamental Analysis rarely works because PEOPLE move prices,not models. Trading activities are prompted by a response to emotional factors that are completely outside the parameters of the fundamental model.In other words,the people who trade that move the prices don't always act in a rational manner.

Technical Analysis is a method that organize collective behaviors into identifiable patterns that can give a clear indication of when there is a greater probability of one thing happening over another.In a sense,technical analysis allows you to get into the mind of the market to anticipate what's likely to happen next,based on the kind of patterns the market at some previous moment.It keeps the trader focused on what the market is doing now in relation to what it has done in the past,instead of focusing on what the market should be doing based solely on what is logical and reasonable as determine by a statistic model.Technical Analysis makes available to the trader a virtually unlimited number of possibilities to take advantage of.The technical approach opens up many more possibilities because it identifies how the same repeatable behavior patterns occur in any time frame.In other words,Technical Analysis turns the market into an endless stream of opportunities to enrich oneself.

So which one do you want to be? The answer is obvious...=)

Cheers
Hyzel

"Historical price patterns continue to work because human nature doesn't change,and neither does the law of supply and demand.Study past successful stocks if you want to know what future ones will look like."

William J. O'Neil