I don't usually get involved that much on forums, other blogs, etc (mainly due to time and probably being too lazy to bother!), but occasionally I will join in a debate elsewhere. I came across an article over at the Motley Fool called
Note to market please crash and posted a few responses, partly to see if people really do like to buy when share prices are falling i.e. prices are now cheap and thus jump in and catch a falling knife regardless. In the event of a market crash I've always felt that it is better to wait and buy when the charts are giving some indication of a bottom and reverse in the trend, the dust has settled. Buying against the trend can often be a nasty experience for your wallet and we've all done it! Sure, things may come back, they often do, but it isn't the right way to do things.
I get the feeling that some, mainly investors using fundamental analysis, don't like or bother with charts. There is a view that technical analysis is hocus pocus or doesn't work, whereas I tend to feel that more often than not it is our own psychology trying to interpret the action a chart is showing that doesn't work (I've been there!) I also believe that even if you are an investor who makes their choice on fundamentals, charts can help you to time your buy (
what time frame are you trading investing in?). This is not the same as trying to time the market, it is about buying when the probability of the direction of the market trend is on your side. Charts tell us this as all they show is a reflection of human behaviour in a chart form - traders and investors - buying and selling. By and large, price and trend going up = more buyers than sellers, more demand, while price and trend going down = more sellers, less demand. There may well be some price manipulation of varying kinds along the way, but for the most part it isn't that difficult to understand why price goes up and down, it's supply and demand and a large dose of sentiment.
