Forum Archive Index - September 2003

["Gavin Treadgold" <gav@rediguana.co.nz>]

Hi T100 and others.

I too have come from an FA background, but I am interested in incorporating
more TA tools into my capabilities.

I don't know if saying FA and TA exist on the same spectrum is right,
because that ties you to a very narrow range of options, almost
competitive - i.e. it has to be one or the other. Or if you use one more,
you have to use the other less.

I see FA and TA as different sets of rose-tinted glasses, both will give you
a different view on a given company, but neither will give you the real
picture.

There are certainly pros and cons both. It would be an interesting
experiment on this list to have people come up with what they think the pros
and cons of each technique are. We can then see how the techniques support
each other.

For starts I'd suggest the following...

Fundamental Analysis (Quantitative and Qualitative)
 + Good for aiding mid-to-long term investment decisions
 - Not very good for short term investment decisions
 + Good at assessing numeric fundamentals of the company
 + Better at assessing non-quantitifable information about the company (note
I say better, not good, because it is hard dealing with things that are not
numbers)
 + Focuses on the company itself - accountability tools such as
Debt-to-Equity ratio, Price/Earnings etc

Technical Analysis (primarily Quantitative)
 + Good for short-to-mid term investment decisions
 + Good at assessing the markets view of the company
 - Not very good at mid-to-long term investment decisions
 + Good at aiding timing of mid-to-long term investment decisions
 + Focuses on the combination of the company AND the market - i.e. the
markets perception of the company

I have just read Cristines post now, and she raises Market, Business and
Price analysis. I see Market analysis being primarily a TA tool as it is
looking at the interface between the company and the market - the price.
Business analysis being a FA tool, and Price analysis being a common ground
that can be used by both - e.g. P/E ratios for FA, and price trends, MA's
for TA.

So, and here is the harder part. Lets name some of these tools... I just
grabbed a couple of each that came into my head.

Fundamental Tools
 + P/E ratio
 + Debt to Equity ratio
 + ...

Technical Tools
 + Stop-loss orders
 + Historical Price
 + Trends
 + ...

If people reply these to the list, then I'll try and consolidate them for
reposting later. I realise there may be some quibbles about where a
particular tool fits - ie is it FA or TA because it may be used by both e.g.
P/E ratio. If so we could turn it around and have a list of tools, and
identify if they are used by FA, TA or both.

I reckon that for those who are not traders, this sort of analysis of the
techniques will allow us to clearly identify the benefits of using both
techniques, and how using both in tandem is better than using either in
isolation.

Cheers Gav



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