Читать книгу Psychological Analysis - Adam Sarhan - Страница 60

As I write this book, there are two prevailing schools of thought when it comes to analyzing markets for the purpose of making informed investment and trading decisions: fundamental analysis and technical analysis. All things being equal, fundamental analysis is used to study the company and technical analysis is used to study the stock. I hope that people will build on my work and that psychological analysis, as introduced in this book, will become the third major school of thought.

Fundamental analysis focuses on the core measurements used to determine the health of a company: sales, earnings, the price‐to‐earnings ratio, return on equity, and many other factors. Fundamental analysis also considers the overall health of the economy, including external factors (like politics) that could have an impact on the performance of the stock in the long term. In short, fundamental analysis is a process investors use to measure the health of a company and assess the state of the economy, to identify under‐ (and over‐) valued assets.

Technical analysis uses historic price patterns, measures of market volatility, volume, and other technical indicators as means of interpreting price movements for particular assets. Technicians acknowledge that the price of a stock does not always reflect the financial realities documented in a company's annual report nor the existing economic climate. Good traders can use this data to make money even when dealing with troubled assets in volatile markets. Whereas long‐term investors rely on fundamental analysis to inform their market strategies, short‐ and intermediate‐term speculators use technical analysis to guide their trading decisions.

It doesn't matter what type of analysis you use to inform your market strategy as long as it works for you and returns a profit. Personally, I have realized extraordinary success by building a market strategy born out of the principles of technical analysis. While I have long‐term investments in my broader portfolio, most of my profits come from short‐ and intermediate‐term trades that take advantage of sustained price movements in the market. At my core, I am a speculator who likes to ride trends and capitalize on abnormal price and volume action.

That said, being a speculator is not for the faint of heart. I lost a lot of money before I developed a strategy that could beat the market, and I lost even more money before I developed the discipline and the smart money mindset required to stick to my strategy and realize actual profits. Trading is not for everyone. Thanks to the Great American Tailwind, despite the daily ups and downs, the long‐term trend of the U.S. stock market is upward; that's why most long‐term investors tend to outperform active short‐term traders. However, for those of us who can excel at the art of trading, the results can be magnificent.