lokgp said...
Having had a weekend with bclee to discuss lesson learnt and to share knowledge gain, had made some conflicting opinions and feelings in me.He is very right in saying that Technical analysis is very specific and very accurate in making investment. Giving specific entry points and also specific exit points. Especially cut loss definitely agree with my 'huge' experience in the Futures Market.
At the same time, as I went back and re-study the charts again. I find that it is definitely possible to invest based on charts, chart analysis and also by a good system.Basically, what BC shared with me is a system.A complete system that incorporate the 4 most important principles in investment:
1.)Cut loss
2.)Let your profit run.
3.)Adding only to winners.
4.)Take profit when the trend changes.
I conclude that all technical analysis implemented as a trading plan is a system.A system can always be repeated.It will minimize losses, and maximize gain.Other technical analysis are simple a chart study, or only as a reference. Just like looking at how fast the car is moving to guess that it is about to stop.
My conflicts comes when I restudied the writings of Warren Buffett and Charlie Munger.They are very sound and logical principles as well. They suggest buying wonderful businesses at a discounted price added with a Margin of Safety. And selling them when they reach their fair value. Because you don't get many chance to find such stocks, you should buy a lot of them rather than diversify. It is not common to find such opportunity.It is so logical and common sense that I find it to be the right way to look at stocks - as an ownership of a business.The problem is, value investing says buy stocks when they are cheap. And technical investing says buy stocks when they about to get more expensive.Both works equally well.But they don't match with each other.
I know if I apply both methods, both will work extremely well.It is like buying 2 hammers with different designs in the hardware shop. Both are equally good but the methods of using the hammer is different due to the design.Because of such:I have to choose only one side.It is like saving your mum or your wife from getting drowned by the river.There lies the conflict.
I feel that it is nearly impossible to use both methods at the same time. They conflict at their root principle.Thanks again bclee for sharing his ideas with me.What a huge conflict.
Note*: After re-reading some of Charlie's writings, I concluded that Kenmark is not value investing. It is not the type that they will buy for their personal accounts and Berkshire.
Note**: Technical investing is easy especially with a well designed system. Much easier than value investing. Some might find it boring.You feel like a soldier listening to orders.- Listen and follow the market, and get extremely rich.
Note***: Value investing needs more work and time but it is equally easy. It is so common sense if you concentrate on buying businesses worth RM 1 with 25 sen. It could make you more excited as you become a business owner. You feel like a commander making a strategy and decision.- Go against market and tell market that one day you will realize that this business is worth a lot more. And get extremely rich too!Both methods are great!Much better than throwing darts to pick stocks!
Regards,Lokgp
