How About Doing What Works?

marketclubminute3

Adam Hewison’s  Minute 3 video (click here to watch) suggests traders choose between technical and fundamental information for their trading decisions.

I have to ask:  How about using what works?

We have the technology now to check out how well each of the different types of data performed in the past.  You can look at the track record of experts writing newsletters, back test technical indicators, back test fundamental numbers like Earnings Per Share (EPS), Price/Earnings, and most of the key statistics of a company.   Services tell how well seasonal predictions correlated with actuals, and even programs to data-mine for dates a market “always” moves.

With all that at our fingertips, we’re in a great position to estimate the quality of data source, and cherry-pick the data sources that demonstrated their effectiveness — or at least avoid the ones that are complete hooey.

However, our human brains are wired for stories.   Both fundamental analysists and technical analysists can weave compelling stories.  Unfortunately, at times the juiciest stories are not based on the strongest data.

Perhaps the key question is:  Do you want to make your decisions based on objective data with a known track record, or do you want to remain a sucker for a good story?  Adam Hewison is right in that you need to decide what type of information you will use to trade.

Leave a Reply

Your email address will not be published. Required fields are marked *