Saturday, November 12, 2011

Do You Invest Based on Your Intuition?

"Do you invest based on your intuition, the fundamental or the technical analysis? This is a question posed by a 18 year old girl who attended my investment workshop last month in KL. I thought for a moment and answered: "Both technical and fundamental." Shortly after, I continued, "sometimes intuition!" I know when I said "intuition" it may discredit myself but I have to give an honest answer, because that's the way I trade - a combination of everything, technical, fundamental, psychology, market sentiment, feng shui and intuition!

Some people will relate "intuition" with feng shui or astrology as they belong to the non-scientific world which is difficult to explain. There is really no right or wrong answer when it comes to investing or trading, because investing is an art!

In the history of investing, there was one a famous investment guru who traded using geometry, astronomy and astrology. He is the legendary William D. Gann who invented the famous Gann Theory - a time cycle based technical analysis.

Gann was born in 1878 and died in 1955, he had witnessed the great depression, the World War 1 and World War 2, the ups and the downs in the stock market for 50 years! He could make prediction of the stock or commodity with the exact price on the exact date! In today's word, he was like a fortune teller, but loaded with strong financial knowledge. For example, in 1909 Gann made the prediction that the price of wheat would go to $1.20 by 12 noon on September 30th. On that day, at the opening, the wheat was selling below $1.08 and it looked as though his prediction wold not be fulfilled. In the end, the wheat did closed exactly at $1.20 at the end of the day!

He also successfully predicted the massive stock crash in 1929. In November 1928 in his annual stock forecast report , he wrote:

"This year (1929) occurs in a cycle, which shows the ending of the bull market and the beginning of a prolonged bear campaign. The present bull market campaign has lasted longer than any previous campaign in the history of this country. The fact that it has run longer and prices have advanced to such abnormal heights means that when the decline sets in, it must be in proportion to the advance. The year 1929 will witness some sharp, severe panicky declines in many high priced stocks....
.... First decline culminates around September 30th; then a rally making top on October 2nd, followed by a decline to October 24th; then a final top around November 2nd to 4th, followed by a big decline, reaching bottom around December 18th to 20th; then a rally to the end of the year." (Does this sounds like a fortune teller?) The stock crash started on October 29th 1929.

Despite having the ability to forecast, Gann emphasized on investment knowledge. He believed knowledge is power! He said: "The difference between success and failure in trading in commodities is the difference between one man knowing and following fixed rules and the other man guessing. The man who guesses usually losses. Therefore, if you want to make a success and make profits, your objective must be to know more; study all the time; never think that you know it all."
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I agree with him totally! Although he was gifted in a way, he stayed humble and used his solid financial knowledge to confirm his prediction. We shouldn't rely too much on feng shui or astrology either in investing or in our daily lives. We must stay objective, equiped ourselves with the right knowledge, and most importantly, stay humble and always have the quest to learn more. With these positive attitude, success is on the way!

More on Gann

Happy investing,
Pauline Yong

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