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by: Shaun Rosenberg

Technical Analysis VS Fundamental Analysis, which one is better. These are two different theories about how the market works and how to make money in them. Hard core Fundamentalist will tell you Technical Traders can not possible make money in the market. Hard core Technical traders will tell you Fundamental Analysis isn't worth the effort.

So, who is right? Let us take a look at both of these theories.

We will start with fundamental analysis. This involves looking at individual companies. You must look at a company's financial statement. You must also be aware of any news that comes from the company.

The whole theory behind this is if you find high quality companies and buy their stock it will eventually go up. After all if a company is a great company its stock should go up.

The problem with Fundamental Analysis is that it favors the large investors. Think about it, if you are investing billions of dollars in a company you can afford to spend millions to find information about that company. You can also talk directly to the CEO's of the companies that they are thinking about investing in. This gives large investors an unfair advantage.

Technical analysis however does not give anyone an advantage. It is all about chart patterns. The more you learn about chart patterns the better an investor you will become. And because it deals with chart patterns everyone who has a computer is on an equal playing field.

Now you may think chart patterns might not be able to help you, but you would be wrong. They have helped millions make money in the market. They also make sense.

If you see a stock bounce between $45 and $60 continuously and it is at $45 you would assume that it is going to go up. Why? Because it has always bounced off of $45 in the recent past. In fact every time it gets to $45 most people consider the stock undervalued and buy it. Also where do you think the stock will most likely go? $60,right?Why? Because it always has in its recent past.

There are hundreds of chart patterns out there that have been tested numerous times by numerous people to be true.

Most technical traders do not concern themselves with a company's fundamentals. This is because they don't really need to. Most of their trades could only last 1 or 2 months. Remember Fundamental Analysis can find strong stocks that may eventually go up in the long term. If you are only in a trade for 1 month it may not be worth looking into.

For more information about how to trade the stock market visit http://www.stocks-simplified.com

By:Jason Ng

Let's cut to the chase...

The biggest and most critical danger of technical analysis is that, after a while, it starts to show you exactly what YOU WANT to see!

In quantitative studies, there is a phenomenon where your research starts showing you what you want to see instead of what is really happening and that is known as "Data Mining". Data Mining occurs most frequently when there is a huge benefit to you if the results are showing one way instead of another. This is the exact same phenomenon in technical analysis.

In technical analysis, charts start showing you what you want to see especially when you have made a mistake and needs the stock to go one way instead of another! Suddenly, the deeper you dig into the myriad of technical indicators, the more "evidence" you seem to find supporting your mistake, giving you the eerie confidence that your mistake is going to turn out just fine.

We all remember how that turned out, don't we?

Technical analysis is essentially a study of the various ways to interpret historical price and volume action in order to form an opinion of future direction. Because technical analysis methods have become so complex over the years with literally THOUSANDS of technical indicators that have been developed, the average amateur investor can always find ways to make a chart look the way they want it to and point towards a non-existent future direction!

Before anyone here thinks that I am against technical analysis, I am not. In fact, my main trading system, the Star Trading System is a technical analysis based option trading system that has made me money over and over again, year after year. So, what really is the problem? The problem is the misuse of technical analysis and the misuse of incompatible technical indicators! Until you really understand the formula and logic behind every technical indicator, the purpose for which each indicator has been developed for and what other confirming indicators works with each other, you will never be able to use technical analysis to form an educated opinion! You will continue to see only whatever you want to see. Some call it "Analysis Paralysis", I call it pure ignorance.

Sadly, it takes years of research and heaps of lost money to get technical analysis right and it will only become harder and harder to get right with ever more complex and new indicators being developed everyday. A lack of knowledge and lack of time to attain that knowledge has always been the bane of all amateur traders. That is why following a developed and proven trading system with a proven, proprietary mix of indicators is the best thing an amateur trader can do.

So, the next time you look at a technical analysis chart, remember, are you merely looking to prove what you already have in mind? Because if you are, then you are very likely to find all the evidences you need to support your own views.

About the Author:
Jason Ng is the Founder and Chief Option Strategist of Masters 'O' Equity Asset Management ( MastersoEquity.com ) and author of OptionTradingPedia.com .

by Kelly Price

Do the opposite of what they do! This may sound obvious but most traders like to follow accepted market wisdom and trade in the direction of the crowd. If you want to win at forex trading you need to step away from the crowd - and that's what this article is all about.

In terms of following accepted market wisdom like day trading, buying low - selling high and predicting the market, these are 3 examples of how to lose when devising a forex trading strategy and if you don't know why read our other articles!

Here we want to focus on taking trades that the majority take and see their equity slaughtered and how you can trade in the opposite direction at the right time.

FACT:

If you buy into extreme bear markets and sell into extreme bull markets, as greed and fear blinds the participants to the reality - you will win.

Not only that - but you will trade with low risk and high reward.

It's a fact that humans push both bull and bear markets too far and if you can spot these extremes and hit the turn you will rack up fantastic gains with low risk.

But How Do You Spot Them?

There are of course forex charts, where you can use technical analysis to look for price spikes - but this does NOT tell you how bullish or bearish the participants are - it just shows you price spikes and trends.

What you need are some sentiment indicators that show how much emotions are moving prices and when the turn is coming.

The best one of all is the CFTC Net Trader Positions and their FREE!

Not many traders use them, but this bi-weekly report is essential for all forex traders.

They show the breakdown of the futures forex markets - but these positions are just as useful when trading cash.

What do they do?

Quite simply they break the position into three main groups:

- Hedgers: These guys are the real pros and are simply hedging a cash position. There not trying to make money so are not influenced by greed or fear.

- Large Speculators: These are large funds who are mostly trend followers

- Small speculators: Everyone else

So why is the above breakdown so relevant?

Quite simply, you can look for extremes either bullish or bearish in speculative positions - with commercials holding and opposite position and moving the other way.

History shows us that the commercials are the right way around at EVERY major top or bottom and the speculators get slaughtered as the market turns.

Be careful!

You have to look for extremes. Once you see speculators heavily net long and commercials moving to the short side - a turn is coming - Prices are to far from fair value and its time to look for a position.

Watching these positions and spotting extremes in sentiment will allow you to:

Trade against the majority when everyone else thinks you are crazy!

You will have the confidence to do this, as the commercials are right about market extremes time after time and you can then look to enter your trading signals, knowing your trading with the smart money.

A Word of Caution

Net Traders positions alert you to the fact a big contrary trade is coming against the herd - but they should not be used on their own - they are not a timing indicator.

You need to use your forex charts and your normal indicators to enter a trade when price momentum turns in your favour.

Trade With the Pro's

Want to know what the real pros are doing?

Then that's what following the commercials via Net Trader Positions gives you.

If you want to trade with the smart money and catch the big profits from the big moves - trade with the commercials for bigger forex profits!


About the Author

GRAB 3 X FREE TRADER & FREE TRADER PROFITS NEWSLETTER

More on becoming a profitable trader some critical FREE Trader PDF's and more FREE Forex Education visit our website at http://www.net-planet.org/index.html

source:www.goarticles.com