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Fundamental Vs Technical Analysis

wallet clockWhich is best; Fundamental analysis or Technical analysis?

There is no doubt that Fundamentals are the drivers of any stock or market. But which piece of fundamental information is driving price action at any moment? If anyone can tell me this then you have my attention!

The media will say they know exactly why a stock price has gone up or down yet the fact is no one ever knows.

We've all seen companies release record profits. Mum and dad investors jump on board in excitement only to see the share price drop and go into the red by end of day. Everyone scratches their heads in disbelief.

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Top 3 Tips for Trading Volatile markets

Fotolia 45872705 MThe sudden volatility we've seen in global stock markets in 2018 contrasts to the low volatility that factored during 2017.

Many traders were caught out expecting only shallow price dips.

Instead we saw 100+ point drops and wild intraday swings on the S&P 500. 

Day traders state they love this type of volatility. Yet in my 18 years in this business, I have yet to meet a day trader who is consistently making profits.

So, is trading extreme volatility worth the effort and stress?

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Is the Australian Dollar as Good as Gold?

gold barsMany factors can affect the price of Gold.

Based on historical relationships, a hawkish U.S Federal Reserve that leads to a stronger Greenback, tends to be bearish for Gold. 

The reverse is true when U.S rates drop. 

Yet, the U.S recently raised rates again, and is predicting further hikes throughout 2018 and well into 2019. 

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Take The Trading Day Off

wathing screensRecently we discussed the Skip Day Strategy. Some more evidence from Bespoke has come to my attention which reinforces our findings, this time with the S&P 500 ETF (SPY).

From Bespoke,

In early February we published a report for our research subscribers showing that more than 100% of SPY’s price change since 1993 (when it began trading) can be attributed to after-hours trading. If you bought SPY at the close on every trading day since 1993 and sold it at the next trading day’s open, you’d have a gain of 569%. Conversely, if you bought SPY at the open of every trading day and sold it at the close that same day, amazingly, you’d be down 8.2%. Below is a historical chart showing the cumulative price change since 1993 for both of these strategies.

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The History of Trade Wars

office trading on mobileAlthough it is impossible to know which piece of fundamental information is driving markets, the Trade War debate is likely to be right in the mix at the moment. And it could affect market performance over the medium term.

Citing the need to protect National Security, President Donald Trump has signed off on plans to impose tariffs on steel and aluminium imports, and in his own words, 'for a very long period of time'.

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Case Study: Building On The Weakest Link

Long Term Stock Market SuccessTravis W. lives in Louisville Kentucky. He's a busy Dad of two young boys with a demanding job as a domestic pilot for UPS. About 4-years ago he read Meb Faber's paper on the Ivy Portfolio which led him down the path of momentum investing.

Over the next few years Travis invested several hundred hours of individual study and testing before live trading an options strategy designed to make him a steady return during sideways markets. He also has invested some assets with professional commodity funds (CTAs) which tend to perform well during sustained bear markets.

However he felt his weakest link in the portfolio was exposure to stocks in a strong bull market. His performance goal for such a strategy was to produce returns exceeding 20% p.a. and be willing to accept higher risks to do so.

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Buy Strong or Buy Weak?

equity growth chartWe've previously investigated buying weak vs buying strong stocks on an annual basis, specifically buying the strongest (weakest) for the year, holding for the following year, then repeating.

What we found is a lot can go wrong with an already struggling company in the space of a year.

And not many people can sit back and let things go from bad to worse.

We only need to take a quick look at Retail Food Group (RFG) to feel that pain.

But what if we look to adjust the portfolio every month rather than every year?

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The Psychology of Trading

Robust SystemIt took a long time for me to understand the importance of psychology in trading. 

About 15 years ago I came across a book, 'The Disciplined Trader' by Mark Douglas.

It was a revelation.

I had a good grasp of trading fundamentals. Plus a strong and workable rules-based trading strategy centered on technical analysis.

Yet, after reading The Disciplined Trader (twice) I realised, in Mark Douglas's words, that successful trading is 80% psychological and only 20% method.

And it was the less obvious psychological aspects of trading that in my first few years as a trader were letting me down.

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