Posted on December 8, 2009 - by La Papillion

The blind men and the elephant

Photo from gopalshenoy

This is probably one of the strongest post I’d made on the TA vs FA topic. If you feel offended, I’m sorry.

When I started out in the market, I had no clues what is FA (fundamental analysis) and TA (technical analysis). I basically just buy based on broker’s reports and hearsay. I remember scanning through CNA forum everyday to pick out those hot counters that people are punting on. Eventually I noticed that the top 30 volume in sgx are these weird little counters that looked like this: STI2750SGAeCW100128 and their % changes each day are superb. I started buying and selling these and eventually started out on TA so that I can understand better the movements of these warrants (notice the order that I learnt TA).

So I started on TA, work out alright and not as magical as I thought. You know, when you just started on TA, I’m looking out for the magic parameters, the magic indicators so that if I knew what those were, I could predict the market. I didn’t realise that TA is just a way to see the market. There’s no magic parameters and magic indicators to make big bucks. I gave up on it after some time when someone introduced me to value investing.

Hey, I know nuts about finance. I took an accounting module which I had no memory of having done before. I had to start from scratch. I started reading up on accounting and on general principles of investing. Again, I was looking out for some magic ratios to calculate the intrinsic value. Why am I looking for the intrinsic value? So that I can see if the price is below value and above value. Buy below value and sell above it, isn’t it what this is all about?

There is no magic formula, no magic ratios to compute that illusive intrinsic value. You can easily be fooled by value, if you ask me. Can charts show you where the prices will be, 100%? Of course not. How about 50%? I don’t know. In real life, the uncertainty is unknown and the probability undefined, so it might be for the best that we don’t kid ourselves with the certainty and assurance of mathematics. Can you ascribe a certainty as to whether a fundamentally sound company will work out fine 30 years down the road too? We do what we can and hope for the best. Read more…

Related posts:

1. The Truth Shall Prevail
2. Multibaggers and Compounding – Their differences
3. Breakthrough Discovery In Forex Trading