AndrewBaker

Beating the Quants at Their Own Game

Technical analysis is used by many fundamental analysts for entry and exit points on a stock they like/stopped liking. Technical analysts will rarely if ever trade with a view of a five year holding period at the outset: they are short term traders. With that in mind, you don't care what's moving the market: only that it is moving. Essentially we are looking at two different trading styles. If I were trading as a chartist, and the price moved against me,say, 7.5%, I would sell (buy if it jumped similarly). I don't care what caused the move. A fundamentalist would probably shrug and think that there was plenty of time for the move to be reversed (if downwards) and brag about their great stock picking (if upward). There is room for both, and because there are both, the markets are more efficient as a result.