Stock graphs are no utopia!
What do stock graphs and science have in common? Very little, except they both at one time were predicted to be the utopia answer to our well being.
In 1899 there was a best selling book called "The Riddle of the Universe"* in which it was argued that science would solve all our problems and in doing so would even eliminate war. Yet, the first half of the 20th century we saw more misery and large wars than just about any other time in human history.
Today too many investors ("players") think the answer to investment success is looking at stocks or commodity graphs only so to detect the next trend to jump on. Many fall into the trap of placing far too much emphasis on a helpful but never more then half-certain prediction. This dominant trend also has nurtured a whole bunch of "nouveau" trading amateurs to emerge by masking themsevles behind their fancy graphs and fancy parlor predictions. Yet, often these graph wizards" true understanding and experience of financial markets is grossly lacking.
Science is just one good tool, and it can be used for good or for bad as we have found out. And people in our business who make investment decisions based only on graphs are like Mr. Haeckel who wrongly thought that science alone "would solve all humanity’s problems". I say investor and trader beware, as graphs are often momentum traps.
Just like it would be wrong to judge a person only on how they look or dress, it would be equally wrong -outright silly perhaps- to only judge a stock on how its price behaved in the recent past. Increasingly so in recent years I notice more and more investment advisors/managers and especially brokers who only evaluate graphs for their buy/hold/sell decisions. I disagree with this.
There is no doubt this is because some of them are not very astute, educated or informed in knowing and understanding the companies they advocate investing in. Perhaps because they want the client to trade, trade, trade??? Regardless, beware of graph junkies as they place all bets on a predicting a line moving forward. Not on seeing good business values and high future dividend prospects.
Now, they might answer they are not investing but trading! My response is that if you are going to trade, why not trade a stock which seems like a good investment, just in case you get stuck with it? That way if you are wrong -at least it is not with a selection where you later find out it was just hot air. As we know, on the SET, the most active traded stocks are often ones with the less then desirable long term business prospects.
While we at thaistocks.com think stock graphs are one helpful tool in the overall timing assessment of a stock investment, I am regularly appalled on how many Thai stock participants only use graphs to make important decisions. No doubt, stock graphs are important for traders but some of the best investments are implemented and decided on a company’s fundamental outlook and relative valuation, not its stock graph! Traders make short term calls for a few price spreads, investors make longer term calls on investment themes which can produce substantial capital gains along with reasonable risk. In some ways, as the Americans would say, it separates the men from the boys.
I do think stock trading in a super charged bull market can be very profitable, but my own philosophy has always been going with the values and good understanding rather then a picturesque graph based on mumbo jumbo " TA analysis". We do the hard work on finding good investments and then explain to our members why, we do not day trades based on graphs. Investing is not "playing" nor is speculating.
I know for a fact many graph junkies recently got it very wrong** by predicting a further SET sell off in mid June, all based on their graphs. Instead the SET just had a good old fashion rally based on good fundamentals, not the graphs. You can count Thaistocks.com sticking with good perceived investment values and not good looking charts!
Best Regards,
Paul A. Renaud.
*By Ernst Haeckel a German disciple of Charles Darwin.
**Khun Anant Tantuvanich whom last month, in his regular Monday edition of the BKK Business Post, firmly predicted a sell off into early July.
