There are endless ways of thinking about the financial markets; for the sole purpose of this article I would like to focus in on only two, specifically regarding technical (trading) vs fundamental analysis (investing).
Many investors focus on longer term ROI (return on investment) and are not as active in the management of their position(s). By having a more hands-off approach, many of the day to day emotions are alleviated or at least reduced. This is due to the removal of the “noise/volatility” that each instrument produces, even down to a microscopic level. While the type of analysis is based on the individual or entity’s personal approach, commonly there is a good bit of fundamental analysis involved. So instead of looking at technical indicators and/or price action, there may be more economic, financial and quantitative determinations to base the investment decisions on, and measure its intrinsic value.
In most aspects of “trading”, there is far more technical analysis involved on a more frequent basis. By taking this approach, you are subjecting yourself to more “noise” and technical information that is not as simple as doing mathematical calculations. It may require a more visual concept in conjunction with specific price and time, based on your technical indicators. Being more visual means a different way of thinking; it’s like combining creative thinking with analytical thinking. Interesting combination right!
Out of the two financial approaches above, trading commonly has a more active approach and along with that comes more decision making. The more decisions one must make, the more opportunities evolve for emotional reactions and potential mistakes.
I genuinely hope that by watching the video above, it can provide a “way of thinking” that can assist you in simplifying the “volatility” in the financial markets. The goal is to have a “rule based” way to approach trading and reduce the emotional decisions, that must be made, to a minimum.
CFTC RULE 4.41 HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
Trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing one's financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results. All Software provided or purchased is strictly for educational purposes only. Any presentation (live or recorded) is for educational purposes only and the opinions expressed are those of the presenter only. Testimonials may not be representative of the experience of other clients or customers and is not a guarantee of future performance or success.
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