Understand fatal flaws of Contrarian Trading

The idea is that the best time to buy is when the market is at its most pessimistic, the best time to sell is when the market is very optimistic. In practice, it is hard to tell when investors are very pessimistic or optimistic. In hindsight, we know these points correspond to lows and highs, but looking forward it is harder. For every seller there … Continue reading Understand fatal flaws of Contrarian Trading

Understand fatal flaws of Technical Analysis

One group of people try to identify price changes by looking at historical price trends. Technicians use price charts (so they are also known as Chartists) containing the price data such as the range from high to low, opening and closing prices. This data may be on daily, weekly or monthly, prices may be linear or logarithmic. It is not possible to go into details … Continue reading Understand fatal flaws of Technical Analysis

Understand fatal flaws of Fundamental Analysis

One group of people use Fundamental Analysis to choose stocks to buy or sell. The are called ANALYSTS, and they forecast future share prices based on a company’s expected operating performance, usually the next few quarters’ profit. Estimates of financial results are based on revenue and cost forecasts, supported by industry and country analysis, drive these profit figures. While the process sounds logical, it is … Continue reading Understand fatal flaws of Fundamental Analysis