Which one is better, fundamental analysis or technical analysis?

Fundamental analysis and technical analysis have always been on the cusp, and investors are always arguing over which of the two is better. In today's article, we will analyze and compare them.

The two main reasons why techies attack fundamentalists are:

First, the specific application of the law of supply and demand requires the operator to have a very high degree of professional theoretical accomplishment, which belongs to the scope of economists' work;

Second, fundamental analysis requires complete and real-time data. The latest market information is quickly digested by the price, and the information that operators hear is outdated and worthless.

In fact, the technical school did not really understand the content studied by the basic school. Of course, for relatively advanced logical deduction, impact factor, quantitative research and other related content, a certain degree of professionalism is indeed required, but these are only for market judgment. Can improve a relatively small success rate, or not much value in the near term. For small-capital investors, the research investment of these knowledge is relatively large, and it is difficult to bring much benefit to the recent income, and the cost and benefit are unreasonable.

However, this does not mean that small-capital investors cannot study the fundamentals. In fact, it is not difficult to understand national policies, economic news, supply and demand information, etc. that have a greater impact on recent market trends. Understanding does not require a deep professional background. Investors with a little bit of relevant knowledge can make qualitative judgments, which can greatly improve the success rate of market judgments. The research investment on this information is small, but the benefits are high. It is very large, and the cost-benefit is reasonable, so it is worth researching by ordinary investors. In addition, the latest information is indeed quickly reflected in commodity prices, but it cannot be quickly digested, and in many cases it cannot be completely digested. One day or two days, but one month, two months, or even one year or two years. Although ordinary investors cannot enter the market immediately, they can easily miss a small market and earn a little less, but they can earn the following market and income. Not small, so it is necessary for ordinary investors to keep track of real-time information. Of course, for investment institutions, the study of fundamentals is even more indispensable. The funds they manage are relatively large. Even if the market judgment can improve the success rate by a small amount, the total income can increase a lot.

So technical attacks on fundamentals are untenable.

Fundamentalists' main reason for attacking techies is untenable

There are two main reasons why fundamentalists attack technical schools: first, the predictions of technical analysis are self-fulfilling; second, can past price data be used to predict the next price direction?

In fact, the fundamentalists do not have a deep understanding of technical analysis theory. There are more than a dozen technical theories, and there are more than 80 technical indicators alone. For each theory or each price status wisdom.

Let's take pattern theory as an example. The price pattern is objective, and studying patterns is not a science, but an art. Specifically, M (double-headed) is used to illustrate. Before the M-shape is completed, the determination of the neckline is not fixed. , the understanding of the degree of change in trading volume and open interest is not fixed, so there will be a lot of controversy on whether it is an M-shape. It is likely to be regarded as a rectangle by some analysts, mistaken for a continuous pattern, etc. In short , the chart pattern opportunities are never clear enough for experienced analysts to agree, even though most analysts predict similar, but they do not necessarily enter the market in the same way at the same time, they may enter the market earlier, or they may Enter the market after confirmation, and may also enter the market when it counterattacks.

Chart patterns such as the M-shape are definitely not the first time someone came up with a whimsical idea, and then investors all over the world followed. For example, if the M-shape is formed, it will be bearish, and then the M-shape will become the price law in the future, unless this person is God, for human beings. All the rules are laid down. In fact, the chart pattern already existed from the beginning, but it was later discovered by someone and proposed. Others used past historical data to detect this pattern and found that the coincidence rate was relatively high. When predicting the future trend, It also succeeded many times, so the chart pattern formed a basic theory and was spread. Other theoretical schools of technical analysis are the same as pattern theory.

The main reason why fundamentalists feel that technical analysis is unreliable is that they do not understand the theoretical basis of technical analysis. In fact, the theoretical basis of technical analysis is the law of groups, which generally means that the movement of individuals is irregular, but the movement of groups is irregular. Motion is regular, just like the theory of quantum mechanics. In the microscopic world, the motion of a single particle is uncertain, and uncertainty is the criterion, but the motion of multiple particles is regular and can be found and used. law. The discovery and explanation of these laws are based on historical data and psychology, and some technical theories can be explained by psychology, but most of the books that introduce technical analysis directly put forward the technical theories without explaining them. The theoretical basis behind it.

Regarding the second question, whether past price data can predict the future is actually a problem faced by fundamentalists. Fundamentalists study a lot of past historical data, nothing more than hoping to judge the future trend from these historical data. So at this point, the fundamentalist attacking the technical analysis group is actually attacking itself.

In fact, a lot of practical experience shows that most of the time, the fundamentals cannot clearly determine the direction of the market, and most of the time it is ambiguous. At this time, when the fundamentals are ambiguous, technical analysis can clearly determine the direction of the market. It is common in trading to figure out one direction in the future, so traders can still make stable profits without knowing the future.