Time Crunch Trading

Fundamental analysis can be applied in any market, though some are a bit more challenging than others. In fact, if you are use a top-down approach to stock market analysis, you could incorporate analysis of several other markets in to your outlook of a particular company’s shares. Fundamentals are excellent for developing an overall picture of the markets, a long-term view, if you will, of where prices are heading.

That sounds an awful lot like trend trading, doesn’t it?

On one level it is. If you apply fundamental analysis properly you can see the big trends. The information will tell you where prices are likely to go. This is especially true in the stock market where it has been repeatedly shown that in the long-term stock prices track earnings. As a company’s earnings increase, its stock price is going to follow. That is why stocks have a generally positive bias.

There is a limitation to fundamental analysis, though. Even the supporters and active users of fundamentals admit that it is nearly useless in short-term trading. While fundamental influences will tend to win out over time, in the near term there are a great many other forces at play in the movement of prices.

What this all means is that you can get everything right, have your analysis absolutely nailed, but watch the market do nothing, or just maybe go in the opposite direction of what you expected. It may be that eventually prices go the right way (at least as far as you are concerned), but that could take time and requires patience, and potentially deep pockets to sit through large drawdowns.

For most time crunched traders, fundamental analysis alone is not a good way to go. It takes a lot of time to do properly, especially when you are just starting out, and even more so when dealing with individual stocks. There is a lot of information to keep track of, and you often have to wait for things to happen.

More than the time required to do and maintain the analysis is the time involved in trading from a fundamental perspective, though. Part-time trading requires time maximization. By itself, trading fundamentally might not produce enough actual trades during your window of opportunity to make it worthwhile – at least by itself. We will talk in the next chapter about other methods we can bring in to play to help in that regard.

We are not denouncing fundamental analysis here. It can be a very powerful tool. If you have the time and inclination, it could really be something worth exploring.

We are looking at things from a time perspective, though. That means we are after the best ways for you to maximize the time you have available. To that end we need to find methods to make sure you trade sufficiently often during your windows of opportunity to make trading worthwhile. To that end will also look at other forms of market analysis.

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