Some people ask: Which is better, fundamental or technical analysis? Well, let’s just say that will only take you down a path of confusion. Why? Because it takes away the focus from what really makes an investor consistently profitable in the markets.
Behind every profitable investor, whether versed in technical analysis or fundamental analysis, is always a great tape reader.
The best investors make money not by only reading 10-Ks, research reports or looking for “head and shoulder” chart patterns but from being able to sense fear and complacency, knowing when to push in an easy tape, when to anticipate and when to wait for confirmation, knowing how to find discrepancies and how to monetize them.
Often the difference between a consistently profitable investor and a churning one is the level of conviction in the plan: The best investors know when to push the envelope and when to wave the white flag. All this will help develop what years later will be called “natural instinct” . . . the “edge.”
Profitable investors constantly create new strategies and methodologies to stay ahead. For readers of my Momentum Trade Alerts service, this has been through patience, selectivity and a willingness to open your eyes (and mind) to finding opportunity where you never once considered.
Every year mutual funds with deep pockets and vast research teams at their disposal underperform the market. There are also hordes of investors who recognize all the chart patterns and can quote verbatim from the Encyclopedia of Technical Analysis on studies, indicators and oscillators . . . but yet don’t make any money trading.
Compare this against the number of active investors with seven-figure incomes who look at nothing else but price and volume.
You see, charts are nothing but visualizations of price action. If I had super-human memory I wouldn’t look at charts. But I don’t, so every night I look through charts to remind myself of the previous days price-action to ultimately find that next compelling story and potential opportunity.
Staying One Step Ahead
On a personal note, I’ve made my income from the market on what is approaching two decades now not because I can read charts well but because I’m constantly looking for new things, for market tells, always trying to stay one step ahead just as in the game of chess.
The first step to becoming a professional investor is to find a type of method that you’re drawn to. One of the biggest mistakes of new investors is wandering into different methodologies simultaneously seeking fast results with little to no understanding of the concepts of risk.
As humans, we define ourselves against others: good cannot exist without evil; the First World means nothing without the Third; and prey can only exist in the presence of predators. Investors can help define themselves and find what they’re drawn to with the help of great mentors, be it premium sellers, momentum investors, value investors or currency investors.