Five. Different understanding of market correctness
Through the above aspects, we understand that the shortcomings of the mutual attack between the technical school and the fundamental school are untenable to a certain extent, so there are both fundamental researchers and technical analysts in the market, both many cases of successful trading relying on fundamentals and many cases of long-term survival relying on technical analysis.
Fundamental and technical analysis has existed for more than one hundred years. Both have not been eliminated, and have been pursued and studied by younger generations. This shows that both theories have strong vitality and self-worth, otherwise one party would have been eliminated. So blindly attacking each other's shortcomings is untenable.
Both have advantages. If we can combine their advantages and try to avoid their shortcomings, the success rate of investment will be greatly improved. Now let's discuss the difference between these two theories.
Understanding the correctness of the market
? Technical analysts believe that the market is always correct, so the first rule of the technical school is: follow the market, do not predict, do not guess.
? Fundamentalists believe that the market is not always right, or even wrong most of the time, and the opportunity for market mistakes is the biggest opportunity for fundamental researchers. Soros is an expert in finding opportunities for the market to make huge mistakes and gain huge profits. Buffett also manages his investments by looking for companies that are seriously undervalued.
Their different understanding of market correctness seems to be completely opposite, and the two theories are completely opposite. Then why can both theories succeed in actual combat? In fact, the two theoretical schools' understanding of the market is based on their own theories and views on the market, that is to say, their perspectives are different, or the attributes of the two theories determine their different views.
As far as technical analysis is concerned, because technical analysis lags behind the price, you can make an analysis only when the price comes out, which determines that technical analysis cannot predict the future, which is determined by the attributes of technical analysis itself, so the technical school pays attention to following the market, and emphasizes not to predict the market because it cannot predict the future; If you are a technical expert, you predict the future, which determines that your so-called prediction is actually a shot in the dark, largely a shot in the dark and a gamble. If you make a deal by guessing, you will lose. Therefore, in order to prevent speculation, technical schools emphasize not to predict the market. If the market is unpredictable, then the market cannot be predicted. The premise is that you need to assume that the market trend is always correct, so that you can follow. If you think the market trend is not necessarily correct, are you still willing to follow the market? The market trend is wrong, and so is your follow-up. Then if you are unwilling or unwilling to follow the market, the whole theoretical system of natural technical schools will be untenable. Therefore, if the theoretical system of technical school wants to stand, it must assume that the market is always correct.
From the perspective of fundamental analysis, because the fundamentals are looking for the reasons behind the market trend, that is, what you can't see from the market trend on the disk, there are fundamental reasons behind the market trend (except the random trend in the day), supply exceeds demand, prices rise, the performance of listed companies rises, and stocks rise. Since fundamentals determine the price trend, that is, fundamentals determine the future of prices, it shows that fundamentals can predict the future. Since fundamentals can predict the future, fundamental researchers or analysts will not say that the market is unpredictable, which is determined by the nature of fundamentals. Otherwise, what is the significance of their survival? The theoretical system of fundamentals can predict the future. If you can't predict the future, it's your ability, not your fundamentals, but your lack of experience, knowledge reserve or logic. Fundamental researchers cannot predict the future, nor can fundamentals predict the future. They are two different concepts. Just like a bloody BMW, it is often unruly and you can't tame it. It's not that this horse is not a good horse, but your own ability, because this horse is obviously superior to other horses in speed, endurance and bravery. Nature is an excellent war horse. Most market trends are caused by fundamentals, but your ability is limited and you may not find the reason, but it really exists, just like air. If you can't see air, you can't deny that it doesn't exist. Especially for the long-term trend, or trend, there must be a contradiction between supply and demand of commodities, or the performance of listed companies, or the macro-economic currency as the reason behind it. Otherwise, capital can't push the trend. Capital usually affects the short-term trend, but it can't determine the medium-and long-term trend, because there are many institutions and funds in the market, always staring at the opportunity of market mistakes. Once the institution tries to push the trend, it will inevitably lead to the price deviating from the fundamentals.
? Since fundamentals are used to predict the future, why should we predict the future? It is natural to grasp the future trend of prices, that is, prices will rise and fall, indicating that the current price is unreasonable, overvalued or underestimated, or the price deviates from the fundamentals. Otherwise, if the price is reasonable now, there will be no so-called future rise or fall. This means that fundamentals need to tap the opportunities of making mistakes in the current market in order to find future investment opportunities. Therefore, the responsibility of fundamental researchers is to study the opportunities for making mistakes in the market. Fundamentalists look for opportunities to make mistakes in the market. Since you are looking for opportunities to make mistakes in the market, your creed must believe that market trends are incorrect and many of them are wrong, so that you have the motivation to explore opportunities for market mistakes. If you believe that the market trend is correct, then why do you study the market? Therefore, the lifeblood of the existence of basic sects is to explore opportunities for market mistakes. It is necessary to assume that market trends are often wrong, and only then can we have the motivation to wholeheartedly explore opportunities for mistakes and find market opportunities.
The theoretical basis of fundamentals and technical analysis has the characteristics of mutual cooperation. When the market makes mistakes, it is essentially Soros's so-called reflexivity theory. To put it bluntly, it is positive feedback or negative feedback in economics. As the price rises, more and more people will buy it, thus pushing the price up further. When the price falls, more and more people will be short, which will accelerate the price drop. That is to say, the trend of technology school will lead to the reflexivity of the market, that is, positive feedback or negative feedback, which will make the market rise too high or fall too low, and the market will have the opportunity to be underestimated or overestimated, so fundamental researchers can take advantage of this market mistake to gradually open positions. The establishment of a position by the fundamentals will return the price to the fundamentals, thus forming a trend. Once the trend is formed, the technical school will have the opportunity to follow the trend and enter the market. Thirdly, it can be said that the technical analysis school has created opportunities for the fundamentals school, and the fundamentals school has also provided opportunities for the technical school to open positions.