Sunday, February 20, 2011

What do you learn in Finance class?

The role of Finance class is to teach you how to calculate (ROI, EPS etc ratios NPV, FV, PV, Rates....), analyze, make prediction(s) base your assumptions. Certainly, with a list of historical data, one can plot a CHART to see the results. Obviously, when you plot this chart, let me assure you that TIME will be on the X-axis (horizontal) and another Parameter on the Y-axis (Vertical). When this is displayed on the Screen over projector, it can be in the format of LINE or BAR histogram. That is what you will learn in school. Using historical data to FORECAST future projection. This is the approach in ALL Finance class.

When another approach (Technical Analysis) is being popularized, it should have a few similar trait to classic Finance including Forecasting ability. When TWO different schools of analysis "collide", there is bound to be proponents verbal violence. Classical Finance carries more weight because it is base on "tangible" data analysis compared to Technical Analysis using Price or Price and Volume.

Despite staunch FA discrediting TA, we should realize that there are veteran TA that consistently makes profit without using FA. There are more amateurs losing TA. This proftable veteran TA do not go round condemning FA but continue to horne their skills. When one is able to consistently make profits in the market using TA, the methodology must be EFFECTIVELY PROFITABLE. It is unlikely this will be revealed. One has to research, test, the approach that FITS your style.

I started using TA in 1994 and I will continue to use it. One should ask, what TA is ALL ABOUT? What are you trying to understand? What are trying to determine? Is forecasting and prediction paramount? Should you try to understand what the market is doing? Let me conclude by saying it is NOT TA's fault. It is the users application problem.

Discover the truth for yourself and I wish you all the best to develop your own simple profitable approach in future. I have my fair shares of success and failures over a period of nearly 20 years. I am still around in the market.

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