Forum Archive Index - September 2003

["Cristine Kerr" <criskerr@optusnet.com.au>]

Hi Gavin,

 

The time periods will need to be defined, i.e.; what period of time is represented by short term, mid term, long term. My own interpretation which may differ from others would be;

 

Day Trade:     1 day

Short Term:    1 week

Mid Term:       1 week - 6 weeks

Long Term:     1 month - 3 months - 6 months - 12 months (start-ups, depending on their stage of development and their potential)

 

You will need input and consensus from everyone on this.

 

Based on the above, I primarily trade in the short to mid term because I gain, trade out, and purchase the next stock. My stocks have a knack of going down before they go up and whilst I found this unnerving at first, I have grown accustomed. Whilst I'm tracking ASX releases for good and bad news and monitoring price fluctuations, I can be comfortable with an initial small backward movement. (If I could no longer track and monitor during the day I would reduce this risk.) I only trade ASX listed.

 

Example: Bought Ivanhoe shares (7 & 8 Aug) based on notices, activities, track record, price history, etc, etc. I considered Ivanhoe way undervalued with excellent prospects. Researched Ivanhoe when the name came up on the radar heavily associated with Intec Ltd. Sold at 30% gain (2 Sep). No one rule for how much gain. Ivanhoe was clearly on the way up and because I'd researched and was confident in its value, I hung around till it reached 30% which didn't take long.

 

No losses of note yet. One loss of $250 on one stock but only due to timing because I was keen to get quickly into another and needed to free up some cash. Usually keep approx 7-8 rolling stocks that I turn over after they've made a profit (and of course, my Intec longer term stock because of its long-term investment in metallurgical innovation, dedicated staff, association with gold, environmental benefits, and fabulous potential, etc). Hoping to pick up another bargain soon when the recent renounceable rights issues are converted and those who were in for only the short to mid term move on to something else.

 

As I've said before, two months does not a track record make (beginner's luck I suspect), however; my realised gain (more on paper, unrealised) for the two-month period, i.e. mid July to mid September is 22% which I'm happy with in these early days and attribute to a market full of great undervalued companies.

 

From what I've read, it appears I apply FA with some elemental TA. I believe application of TA would enhance my results. Unfortunately, my time is too stretched at present to investigate that possibility further.

 

Regards,

Cris

 

 

----- Original Message -----

From: Gavin Treadgold

To: sharechat@sharechat.co.nz

Sent: Friday, September 26, 2003 6:33 PM

Subject: RE: [sharechat] FA/TA

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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