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Is technical investing more risky than value investing?

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Billy

07 Apr 2019

Development & Acquisitions Manager at Real Estate Private Equity

Hi David, a pleasure seeing you back here.

In a nutshell, technical indicators do not look at the underlying fundamentals and financials of a business, it merely looks at the price trends of a stock to determine entry / exit price - The company may be in the red consistently for 5 years but if one applies technical analysis, there'd be a chance that one may still purchase this counter. So in terms of riskyness, based on the example cited, I think it would without a doubt carry slightly more risk than value investing

Personally, I feel that there's no true "technical investing", only technical trading. The only aim is to profit in the shortest frame as possible via price swings/fluctuations without consideration to the company's long-term fundamentals, dividend payouts, quality of management etc. You utilize the technical tools thats available to you & ascertain a target (buy/sell) price to enter & a subsequent target (sell/buy) price to exit the position within a set timeframe, could be days/weeks but rarely into months/years. One is making a trade order on the entire basis on how stock price behave in that single time frame. But whether technical investing is truly riskier on the practical application really depends on the individual trader, ability to stay discipline such as cutting loss when things go awry, amount of leverage used, eyes staying glued to the screen all times to be able to made a quick decision etc.

However, as a individual who is "buy & hold" long-term fundamental investor, I do find technical analysis (albeit in much simpler forms) do have its merits when I made a decision to buy-in aftering doing my fundamental analysis. I would looked at things such as bid/ask volumes, recent price trends, price support levels to determine the appropriate price range to enter. Although quite a handful of fundamental investors out there advocate that if you are buying for the long-term, then the entry price does not matter, I tend to mildy disagree. If by allocating some time & effort to do some basic technical analysis, couipled with a dose of patience, there's a good probability one can get a stock at a better starting dividend yield & able to buy more stocks using the same amount of money. That's akin to receiving a small bonus ,free-of-charge into one's pocket.

Actually it depends on alot of factors, but let's say in a general, stereotypical layman form, that ...

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