Say Goodbye to Blind Investing! Technical Analysis + Fundamental Analysis, Build Your Stock Market Profit System

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Have you ever bought or sold stocks impulsively? Blind investing can expose you to unnecessary risks and even lead to financial losses. A scientific profit system can help you avoid these pitfalls, making your investments more grounded. Many successful investors have found that no single method can address all market changes. By combining technical analysis and fundamental analysis, you can improve the accuracy of your decisions.

• Fundamental analysis is suitable for long-term investing, and combining it with technical analysis can enhance decision-making.
• A hybrid approach allows you to seize opportunities while understanding the essence of the market.
• The market is influenced by fundamental factors and sentiment, and the two analysis methods complement each other, reducing risks.

Key Highlights

• Combining technical analysis and fundamental analysis improves the accuracy of investment decisions and reduces risks.
• Identify and overcome common psychological pitfalls in investing, such as greed and fear, to maintain rational judgment.
• Establish a clear profit system, define investment goals and risk tolerance, and develop a scientific investment plan.
• Regularly review and optimize investment strategies to adapt to market changes and maintain long-term stability.

Say Goodbye to Blind Investing

Pitfalls of Blind Investing

Do you often make investment decisions based on gut feelings? Many investors fall into common psychological traps that affect their judgment and lead to poor decisions.

• Greed: You may overlook risks in pursuit of higher profits.
• Fear: You may sell too early out of fear of losses.
• Doubt: You may question your choices, leading to indecision.
• Herd Mentality: You may follow others’ actions without independent judgment.
• Envy: You may feel resentful seeing others profit, leading to reckless chasing of highs.
• Overconfidence: You may be overly confident, ignoring market changes.
• Capitulation: You may give up during losses, missing rebound opportunities.

Investing, especially poor investing, often makes you overly focused on your performance. You may hope to achieve higher returns through risk-taking, but this often leads to losses. The market can behave irrationally for extended periods, causing you to lose confidence due to short-term losses and exit at the worst possible time.

Risks and Consequences

Blind investing not only causes psychological stress but can also lead to tangible financial losses. Without a clear analysis method, you are easily swayed by emotions, leading to frequent trading and increased transaction costs.

You need to recognize that only by establishing a scientific analysis system can you reduce these risks and make investments more grounded.

The table below highlights the psychological factors to consider when transitioning from blind investing to a systematic approach:

If you can confront these psychological factors and analyze the market systematically, you can better control risks and improve investment success rates. Systematic analysis not only helps you make rational decisions but also keeps you calm during market fluctuations, laying a solid foundation for building your profit system.

Profit System Framework

System Goals

When investing, you need a clear profit system. This system not only helps you predict market changes but also evaluates company value and economic growth. Academic and industry literature often define a profit system as follows:

• The profit system model applied to U.S. commercial sectors and the national economy
• Forecasting output, capital stock, total profits, profit margins, and marginal profits
• Examining the relationship between profitability and business cycles
• Simulating the impact of monetary policy changes on the economy
• Evaluating the S&P stock market index and individual company values

Through these goals, you can establish your own investment framework, making decisions more grounded.

Roles of Analysis Methods

In a profit system, technical analysis and fundamental analysis each play distinct roles. The table below outlines their roles:

You can use fundamental analysis to assess a company’s long-term potential and technical analysis to time buy and sell decisions. Combining the two makes your investment strategy more comprehensive.

Complementary Advantages

Relying solely on one analysis method may cause you to overlook certain market changes. Technical analysis helps you time trades, while fundamental analysis reveals a company’s long-term potential and risks. By combining these methods, you gain a more balanced perspective, leveraging their respective strengths to improve investment success rates.

• Technical analysis helps you gauge short-term market trends.
• Fundamental analysis helps you understand a company’s long-term value.
• Combining the two enables rational decision-making in various market environments.

Through this complementary approach, you can build your own profit system, achieving more stable investment returns.

Technical Analysis

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Technical Indicators

When learning technical analysis, you first need to understand commonly used technical indicators. The table below summarizes several widely used technical indicators in stock trading and their calculation methods:

Through these indicators, you can observe price trends, fluctuation ranges, and market sentiment. For example, an RSI above 70 may indicate a stock is overbought, while below 30 suggests it may be oversold. MACD helps you identify changes in price momentum.

Application Scenarios

Technical analysis is widely applicable in different markets and scenarios. You can leverage it in the following contexts:

• In commodity and forex markets, technical analysis is particularly effective, as support and resistance concepts are more easily validated.
• In the stock market, technical analysis is suitable for short-term trading, helping you capitalize on price fluctuations and market momentum.
• When the market shows clear trends or momentum, technical analysis can help you identify buy or sell opportunities.
• In range-bound or consolidating markets, technical analysis can assist in determining whether to hold or wait for a breakout.

You can flexibly choose appropriate technical analysis tools based on the characteristics of different markets.

Decision-Making Role

Technical analysis provides a structured approach for short-term trading decisions. You can use technical analysis as follows:

• Use price, volume, and volatility data to quickly assess market sentiment and trends.
• Use technical indicators to identify breakouts, support, and resistance levels, aiding in buy or sell decisions.
• When momentum is strong or the market is influenced by behavioral biases, technical analysis can help you seize short-term opportunities.

Note that technical analysis relies on historical data, and historical patterns may not repeat if market conditions change. Different traders may interpret charts and patterns subjectively, leading to varying conclusions. Additionally, external events like breaking news can invalidate technical analysis. When applying it, combine it with other methods to reduce potential risks.

Fundamental Analysis

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Financial Metrics

When analyzing a company, you can use financial ratios to assess its long-term performance. The table below lists key financial ratios identified in academic research as most predictive of long-term stock returns:

These ratios help you assess the relationship between a stock’s price and the company’s fundamentals, allowing you to identify undervalued or overvalued stocks.

Industry Evaluation

When selecting stocks, you also need to evaluate the industry in which the company operates. Common industry analysis methods include:

You can combine these frameworks to gain a comprehensive understanding of the industry environment and a company’s competitiveness.

Stock Selection Applications

Fundamental analysis provides deep insights into a company’s intrinsic value and growth potential. You can:

• Analyze financial data and industry conditions to determine if a stock is overvalued or undervalued.
• Focus on a company’s long-term growth potential rather than short-term price fluctuations.
• Make more informed investment decisions by combining a company’s financial performance, market position, and industry characteristics.

Fundamental analysis is suitable for long-term investing. You can use it to identify high-quality companies with sustained growth potential, helping you achieve stable long-term returns.

Combined Strategy

Screening and Decision-Making

To make more informed decisions in the stock market, you can combine fundamental and technical analysis. This approach helps you screen high-potential stocks and identify optimal buy and sell timings. Follow these steps:

1. Research the company’s basic information, including industry background, management team, and establishment history.
2. Analyze the company’s financial health, focusing on key metrics like debt levels, interest coverage ratio, and liquidity ratio.
3. Evaluate the company’s performance, such as revenue, profitability, and future goals.
4. Use technical analysis tools to observe price trends and trading signals.
5. Combine fundamental and technical results to make final investment decisions.

You can also use the following methods to improve screening efficiency:

• Stock screening: Use technical criteria to filter potential stocks.
• Chart scanning: Analyze price charts of these stocks to identify suitable entry points.
• Trade setup: Conduct detailed chart analysis on target stocks to select the best trading candidates.

Tip: Stay informed about market developments. Market fluctuations and unexpected events can impact a company’s fundamentals and stock price. Avoid focusing only on data that supports your views. If fundamental and technical analyses conflict, reassess your judgment.

Case Study

You can understand the effectiveness of a combined strategy through real-world examples. Take the U.S. market as an example: suppose an automaker reports strong quarterly results, improved profit margins, and export growth, along with a future electric vehicle strategy. Analysts upgrade the company’s rating, anticipating strong growth in the coming years.

On the technical side, the stock has been consolidating in the $1,200–$1,300 range for months with low trading volume, indicating quiet accumulation. After the earnings release, the stock breaks above $1,300 with significantly higher volume.

You can operate as follows:

• After the company releases positive news, monitor whether the stock breaks out of its consolidation range.
• If the price breaks out with increased volume, consider buying.
• Set a stop-loss below the breakout range to manage risk.
• When both fundamental and technical signals support an uptrend, consider holding the position.

This approach allows you to capitalize on long-term opportunities driven by fundamentals while using technical analysis to capture short-term entry signals.

Optimization Suggestions

To make the combined strategy more effective, consider the following suggestions:

• Stay updated: Continuously monitor market and company developments to adjust analysis conclusions promptly.
• Avoid confirmation bias: Don’t focus only on data supporting your views; be willing to revise when analyses conflict.
• Stay adaptable: Market conditions change, and previously effective methods may become obsolete. Continuously refine your analysis methods.
• Pursue consistency: No strategy guarantees 100% success. Build a stable method and stick to it long-term.

The table below summarizes common optimization techniques:

By combining fundamental and technical analysis, you gain more comprehensive decision-making insights. Commonly used technical indicators include moving averages, Relative Strength Index (RSI), Williams %R, and stochastic indicators. These tools help you better navigate market rhythms.

Reminder: The core of a combined strategy lies in continuous learning and review. Only by consistently optimizing your system can you achieve more stable returns in the market.

Building a Profit System

Goals and Risk

When building a profit system, you first need to clarify your investment goals and risk tolerance. Only by understanding your needs can you develop a suitable investment strategy. Assess yourself based on the following:

• How soon do you need to access your invested funds?
• Can you hold steady if your portfolio declines by 20%?
• Are you investing for retirement, education, or short-term goals?

The table below outlines common investment goals and related key questions:

Set clear goals based on your situation, such as planning for retirement in 20 years or saving for a child’s education in 5 years. Assess your tolerance for fluctuations. If you panic during market downturns, opt for a lower-risk portfolio. Only by defining goals and risk tolerance can you build a profit system tailored to your needs.

In practice, you may face challenges like funding shortages, inaccurate cost estimates, or inefficient data management. Mitigate these risks by using digital tools, automated systems, and building strong relationships with providers. Ensure sufficient insurance coverage to protect against financial losses from unexpected events.

Investment Plan

To achieve your investment goals, you must develop and strictly follow a scientific investment plan. A good plan helps you withstand market fluctuations and reduce emotional interference. Consider these methods:

• Dollar-Cost Averaging: Invest a fixed amount monthly or quarterly, regardless of market conditions, to smooth out purchase costs and reduce the impact of market volatility.
• Rebalancing: Periodically review your portfolio’s asset allocation. If one asset class grows disproportionately, sell a portion and buy underperforming assets to maintain balance.
• Automation: Use automated investment tools or platforms to set rules for buying, selling, and rebalancing, minimizing emotional influence on decisions.

You can leverage automated investment services from licensed Hong Kong banks, setting up regular transfers and investment instructions. These services, typically denominated in USD, help you manage cash flow and investment discipline effectively.

When creating an investment plan, consider funding sources, investment horizons, and liquidity needs. For example, allocate short-term funds to highly liquid assets and long-term funds to growth stocks or index funds. Reserve emergency funds for unexpected expenses.

Review and Optimization

To keep your profit system effective, regularly review and optimize your investment strategy. Markets evolve, and only continuous adjustments maintain competitiveness. Use these methods:

• Regularly review and rebalance your portfolio to align with your goals and risk tolerance.
• Conduct stress tests and scenario analyses to evaluate portfolio performance under different market conditions.
• Continuously monitor market trends and adjust strategies promptly.
• Work with professional financial advisors to set goals and track performance.

Leverage artificial intelligence and portfolio management software for detailed analysis and personalized recommendations. These tools use historical data and current trends to identify risks and opportunities. Robo-advisors and algorithmic trading systems enable automated management and efficient execution.

During reviews, assess your investment plan’s execution, analyzing the success and failure of each decision. Record the rationale and outcomes of each trade, summarizing lessons periodically. Monitor external changes, such as policy shifts or market volatility, and adjust strategies accordingly.

Understand that a profit system is not static. Continuous learning, reviewing, and optimizing are key to achieving long-term stable returns in the market.

By combining technical and fundamental analysis, you gain a more comprehensive investment perspective. Research shows that systematic investing yields significantly higher returns than random trading.

Through continuous learning and review, you can refine your profit system. Use educational articles, webinars, and expert insights to maintain strategy adaptability. This approach positions you to achieve long-term stable profits in the market.

FAQ

Can technical analysis and fundamental analysis be used together?

You can use technical and fundamental analysis simultaneously to evaluate stocks more comprehensively and improve decision accuracy.

How do I assess my risk tolerance?

Review your past investment experiences. Can you stay calm during market downturns? If not, consider a lower-risk portfolio.

How often should I review my investment plan?

Review your investment plan quarterly to identify issues, adjust strategies, and ensure progress toward your goals.

What are the advantages of automated investment services from licensed Hong Kong banks?

You can use automated investment services from licensed Hong Kong banks to set regular transfers and investment instructions, reducing human interference and enhancing investment discipline.

What should I do if technical and fundamental analysis results conflict?

Reassess your judgment, incorporating the latest market information. Adjust your strategy and avoid focusing only on data supporting your views.

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