hr: Money

There are two main schools of thought in analyzing the capital markets. Fundamental Analysis, the use of the company’s books and economic data to determine it’s value, and Technical Analysis, where the supply and demand of an issue, contract, commodity, etc. is being analyzed to forecast future results.

There are a lot of disparities between the two schools of thought. Fundamentalists would go long or short because of valuations while technicians go long or short because of trend continuations or reversal. A Fundamentalist could buy shares of an issue that is nose-diving with his belief that it’s getting cheaper, while a technician would definitely not like it in his portfolio because it broke major trend lines or averages.

There has been an unspoken conflict between the two schools of thought for the past years. A Fundamentalist could be buying the company because of its valuations while a Technician could be shorting it because of its trend.

Fundamentalists call Technical Analysis a “self-fulfilling prophecy” while Technicians do believe that all data are already discounted into the market and books can be cooked. While both of them can be true, the fact is, both of these schools of thought make money.

Ultimately, it’s for the investor to choose what he would like to believe in as long as it makes him money. After all, it’s the profits that really matters in the bloody streets.