Fundamental or technical analysis when trading, and do the perfect strategy really exist?

Surprising how many professional traders have answered this question. I agree with the majority of answers, but I want to explain more about why, because I doubt most casual traders have any real idea about what they are up against trading markets these days.

First, traders are not doing well with simpler methods. Markets are anything but simple. Markets are complex. If markets were so simple that you look at any chart and can say “see that trend going up on the chart at a 30 degree angle, well chances are 100 percent it will keep doing that for the next year” then everyone would be making money. The math of markets is a zero sum game, with both a loser and a winner on either side of every trade.

The reality is not simple. Thinking it is simple is delusional. Competition can appear in the market, investors can suddenly think that some conservative investment is now over valued, etc. I like the Jack Swagger quote. “There are millions of ways to make money in the market, and every one of them is very difficult to find”. Jack published the popular market wizards series of books, and recently founded, which he funded with the help of FIS Global, the worlds largest FinTech company.

Difficult not impossible, and the smartest people are generally the ones who win trading markets.

For example, people say it is good to buy when the stochastic is below 10, then sell when it is over 90. Ok, exactly which moving averages are best to use for the stochastic indicator? To know that you have to test every possible combination of stochastic parameters, look at years of data, identify all high value trading targets in those charts, and evaluate exactly which sets of stochastic moving average parameters have the highest or lowest correlations in terms of their ability to accurately identify high value trading targets. Same is true for every other indicator, and every other chart pattern, and every book fundamental. Now we are just getting started. Lets consider all possible combinations of indicators, chart patterns, and fundamentals. Now we are getting some place developing a brute force combinatorics market solver that might actually outperform, compared to all the other complex neural nets trading the market which are also trying to make money.

Dealing with the impact of realtime news hitting the market is even more complex, and more difficult to generate probability tables for. Intel cannot build fast enough CPUs with enough cores to solve these profit optimization problems. A rack of servers running 32 core ThreadRipper CPUs helps, but we are talking about infinite complexity so any solution is going to fall short of whatever ideal strategies might exist. The analysis process has to be fast because it is always chasing a moving target. Strategies that worked well weeks ago or months ago may lose a lot of money this week. The character of the market is constantly changing. It is a big challenge just figuring out if the daily or weekly trading bias is truly bullish, bearish, or neutral. If you are trading a lot of volume there will always be a negative pricing feedback loop.

Trading is a technology war zone that just keeps escalating as technology improves. Markets are only getting larger, faster, and more complex. For the average investor long term buy and hold is the best strategy, especially combined with dividend paying stocks, and other conservative strategies like selling covered calls. If you are not a professional trader, and think you do not need all the advantages I just described, then give it a shot. It is possible that you will bet lucky and find something that works well enough over time. Your chances are better than winning a lottery ticket. On average though, the majority of casual traders will lose money when competing with professional traders due to a lack of technology and high end trading infrastructure. CLICK ON IMAGE FOR EBOOK.

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