
Hello,
Actually there have been quite a lot of arguements on which is better... but if you ask me, i think both are good methods. it just depends on the user's style and preference... :)
Anyway, what is the difference between the two? Well, FA looks at balance sheets and annual reports to make their picks.
TA looks at the charts to make their picks.
actually, both have some very
different perspective on "expensive" and "cheap"... hence time to buy and when not to buy...
if you were to imagine stock is a product, you might be able to understand these methods better. FA uses annual reports to determine the current and future potential of a company and sets a value for it... for example, by using annual reports, FA defines a value or the price the stocks is
worth.... either now or in future (investments). so when the current price is higher than wat they value now or the future potential, they consider it as expensive... but if the current price is below their value, they call it cheap or discounted... so it will mean time to buy... that is why you find investors using FA
averaging down...
TA on the other hand do not really focus on the price itself or the potential of the company, but rather on the balance between
supply and demand. no matter how good or how bad a company is, there will be a time to buy and time to avoid... TA buys when there is demand for the stocks... or when the demand is starting to exceed the supply... which also means tat the price is going up... so, wat is expensive and what is cheap for TA users? hehe...
Basically, expensive is the price when the demand is getting lower, which is when the price will start to drop... and cheap when the demand starts to pick up... so, TA actually
averages up and dont average down (normally). because as i said, it is about supply and demand, when price go down, it means the demand is less, so TA will avoid such stocks...
to sum up, FA values a
point or a range of a price tat they think the stock is worth, anything more is expensive and less is cheap...
TA tracks a
movement of price, so you can say there is no cheap or expensive, only demand vs supply... buy when there is demand...
So, this is why investors using
FA averages down but traders using TA dont...
Regards...