Message Font: Serif | Sans-Serif
No. of Recommendations: 13
The more important issue imo is that techincal based trading is not something a person should do just because it could be proven to provide better results (not that it could be "proven"). Technical analysis and trading is something you do because you enjoy doing it. If it doesn't appeal to a person then they should most definately stay away from it ... they won't succeed.

Are you trying to earn your moniker? This is the dumbest rationalization for an investment strategy I've ever heard. The only reason to ever pursue any investment strategy is because it is likely to produce better long term results than the market average. If you want to do something with your money because you enjoy doing it then take up gambling.

By the same token, if it were proven to me that I could achieve better results if I learned to do detailed financial analysis of companies, I probably wouldn't be interested. It would require that I do something I am really not interested in. I'd probably go back to mutual funds.

If you are not interested in doing the hard work of financial analysis then you probably shouldn't be investing your money yourself. You should buy an index fund and take up the horses for fun.

If you intended this post as a defense of technical trading you failed miserably. There is no defense of this voodoo as a plausable investment strategy for lay investors (or anyone else for that matter). As you note, "There also is a lot of art involved in technical analysis." Why practice an art when the science of value investing is freely available for your use?

By the way, the problems of quantitative approaches to investing were discussed on the News Hour last night when Nassim Taleb discussed the "Black Swan Event". Technical traders develop quantitative formulas for investing that are increasingly abstracted from underlying economic fundamentals, and are based on models that typically underestimate the risk of long tailed events. When those "Black Swan Events" happen they send technical traders into the great black hole where they are crushed and their capital is incinerated. One day a LTCM or Amaranth will drag some creditor with them into the vortex. When that happens, says Harvey Goldschmid..."someone may then not be able to pay someone else. And if that bounces through the economy, you could have a crisis of confidence and failures to pay."

Quantitative approaches breed the overconfidence of mathmatical certainty, and with that overconfidence comes the risk of ruin from the realization of the impossible. Their is no point in flying blindly when a proven strategy is available to you.


Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.