Bernard Oppetit introduced a very interesting concept.
"Fundamental analysis is very important, but so is what I call 'dynamic analysis'. You want to know what exactly happened to a company, what someone did, what the purpose was, when they planned to do it, and how far they could do it. There is always a story behind any event, and you have to understand that story."
According to Bernard Oppetit's view, corporate events cannot develop in a vacuum, there must be a cause and effect, and you must understand the whole causal relationship and background.
"For stock trading, I think technical analysis is 99% nonsense, this may not apply to foreign exchange, most commodities, indices, and interest rates. Technical analysis is very important in these areas because these markets do not have a unified correct way, even if your operation is not ideal, the result may be better than ignoring it. But I still want to emphasize one point, calculating the story behind it is very important: who intends to do what."
The protagonists may not be banks, suppliers, and shareholders of the company, but governments, supply and demand relationships, and producers.
"There are many ways to Rome, you can also make money by technical analysis alone. Although I don't know how to do it personally, I believe it can be done."
In the case of Northwest Airlines, Oppetit used dynamic analysis. He wanted to know the "story" in it. What was the motivation? Where was the point of influence (in other words, who was the protagonist?)
The analysis was dynamic because the situation was not static. He was not concerned about the income statement and balance sheet of last year. Oppetit deals with a living and developing object, which could change at any time and have a significant impact on the stock price.
However dynamic analysis may not always be the most suitable analysis tool. Bernard Oppetit changed the analysis method according to different situations and trading types.
This is very important, you must understand the market type and time frame of your trading. For example, in a high-liquidity market, technical analysis is more appropriate than fundamental analysis.
On the other hand, if the basis of the trade is based on the economic outlook of a country in the next few months, fundamental analysis should be more appropriate.
"I do many different types of trades. For example, convertible arbitrage is one of them. This is a relatively pure derivative trade, the motivation may be to buy implied price volatility and short historical price volatility. This type of trade is more suitable for technical analysis. For risk arbitrage, the nature of the trade is completely different."
What do other people think?
In trading or other competitive situations, you must always understand why the situation is in its current state. Why is the price at this level? Why is the volume low today? Why did a bank buy this company's stock? Why did that bank sell the stock? Why did the company's general manager buy extra shares?
If you don't understand the situation around you, you are unlikely to know the development and the reason for the situation. Whether you think the price will change or remain unchanged tomorrow, if you can't grasp today, you can't understand tomorrow.
"I often remind myself: 'Am I fully aware of what I am doing? Do I have a better grasp of the situation than my competitors? Why did he take this action? If I buy, why does he sell? What is he thinking?' If I don't know the competitor's thinking, I feel uncomfortable."
"This is reverse thinking. I believe that you should go against the crowd. But it is really difficult to measure the consensus of the crowd. On the other hand, the consensus of the crowd may also be correct. For the recent bull market in the US market, the consensus of the crowd is indeed correct."
"I have to understand the opponent's thoughts, and where the difference between me and him lies. The answer may be simple. For example, they may not consider the implied price volatility. If I think I am buying low implied price volatility, but the opponent's idea is not, then I know the motive of his behavior, if I still believe that my view is correct, that's enough."
"This kind of comprehensive thinking process is also an appropriate tool for risk management. This can ensure that you do not neglect any link, and fully know why you establish a certain trading position."
"Therefore, before placing an order, you should have this kind of information, and be clear about your expectations. Once the position is established, you can cope with the subsequent development and take decisive action."