Technical Analysis vs Fundamental Analysis: My First Investing Failure—and What Finally Worked

It took roughly 10 years after putting a plan on paper and posting it above my computer before reaching financial independence. I wish I could say our path to FIRE was smooth from the get-go, but in reality, it took a couple of tries to find what worked.

It’s said that outside of just getting lucky, there are only a few paths to make substantial money: start a business, real estate, and the stock market. I tried all of these before settling on stock market investing. And even that didn’t go well at first.

Today, I wanted to share a few of those failures—particularly my early experience with stock trading and investing—and how I finally found what worked for me.

HITTING ROCK BOTTOM LED ME TO THE STOCK MARKET

Although I know many people who have built their wealth by owning real estate, I learned very quickly that it wasn’t for me. Worrying about costly repairs and renters who might be late on payments was too stressful.

I had slightly more success as a small business owner. With a head full of ideas, I got my wife to agree to giving me a few years to try to get things off the ground, but I never got off the runway. The most my business ever made in a year was $20k before taxes. And no other year came close.

After several years of making next to nothing, I decided to go back into the workforce. This in itself proved difficult. Without an in-demand college degree or desirable job skills, I struggled for a year and a half to find work.

Out of desperation, I finally took a job at a major department store, working less than 40 hours a week. Here I was in my early 30s—my supposed prime earning years—making $12 an hour. I felt like a complete failure.

I questioned every decision I made in life up until then. I looked enviously at the social media posts of my successful friends and scolded myself for not planning for my future when I was a student. For thinking I could hack it as a business owner. And for believing a “former small business owner” would easily land a job.

I remember my wife telling me at the time that I was so full of confidence when we first met. Now, however, she could see in my face that all that confidence had vanished. I was at my lowest point.

The one silver lining of my job was that I wasn’t on the sales floor. Rather, I spent time behind a computer. There also wasn’t much for me to do, so I decided to use that time to study.

One day, I found myself in Borders Bookstore—remember those?—when a book caught my attention: “How to Make Money in Stocks” by William O’Neil. The straightforward title made it seem like I was destined to find this book.

I read a few pages and was instantly hooked. This book didn’t just teach when to buy a stock. It taught how to use technical analysis to determine the exact buy and sell points. It literally spelled out what buy low, sell high meant. This, I said to myself, was going to get us on the right financial track.

I didn’t think twice about buying this book and immediately poured myself into it. During my downtime at work, I read and reread chapters and typed out notes on the computer. After a year, I had filled a three-inch binder with notes.

Armed with my new knowledge, I opened my first brokerage account with a small amount of money. I even subscribed to a weekly financial newspaper. I was determined to succeed.

Except it didn’t turn out that way.

WHY TECHNICAL ANALYSIS AND TRADING DIDN’T WORK FOR ME

Technical analysis is the use of stock charts to determine when to buy and sell a stock. It’s based on the idea that human beings are creatures of habit, and these habits are reflected in a stock’s price movements. For example, we know people sell stocks when they panic, leading to a price drop.

Occasionally, the lines on a stock chart will form patterns that are used to predict the direction a stock’s price is headed. These patterns are recognizable to the point that they have names such as cup and handle, head and shoulders, and double bottom.

At a time when I was in the fog about the stock market, technical analysis seemed to be a beacon. Here was a system that turned seemingly random lines on a chart into clear directional signage.

At first, I thought technical analysis was the perfect method for me. Using chart patterns to determine buy and sell points meant transactions could be very mechanical and devoid of emotion or bias.

Except that it wasn’t.

I was checking my stocks regularly to see if a sell signal was triggered. Watching the stock price swing up and down brought knots to my stomach.

I found myself constantly second-guessing if I misread the charts and my predictions were wrong. Because chart reading is as much an art as it is a science.

Chart patterns like the aforementioned are easy to see in hindsight, but they can be hard to spot as they’re forming. And while humans may be creatures of habit, a tendency to behave a certain way most of the time isn’t a guarantee they’ll behave that way all of the time.

Just like how monsoon season doesn’t always guarantee rain, sometimes charts can be flat-out wrong. What was supposed to be a very mechanical process of making money was mentally exhausting.

I also realized that what I was doing wasn’t investing in companies. Rather, I was trading stocks like they were collectibles. I was trying to predict short-term stock movements to make a quick buck. I didn’t care what stocks I bought as long as I thought I recognized a chart pattern. It wasn’t much different from placing a sports bet on a game after reading about a star athlete’s injury in the news. It felt like I was relying on luck to reach financial independence.

Ultimately, I ended up making little to no money using technical analysis. And once I accounted for short-term capital gains taxes from the dozens of trades, I made even less.

I failed once again.

DISCOVERING FUNDAMENTAL ANALYSIS—AND A BETTER FIT

My lack of success led me to walk away from my brokerage account for years. I eventually got a better-paying job and forgot all about stocks. My newspaper subscription was canceled, and my binder of notes sat unopened on the shelf. The occasional account statement in the mail was the only reminder of my failed attempt to break free from the rat race.

Flash forward to 2008 and the Great Recession. It was around this time that I learned about another method of analyzing stocks—fundamental analysis—that coaxed me out of hibernation.

With fundamental analysis, there’s no searching for chart patterns. Instead, there’s a focus on a company’s business prospects. Whereas technical analysis might be concerned with short-term price movements, fundamental analysis takes a long-term view.

If technical analysis were akin to predicting the outcome of a single game, then fundamental analysis was like predicting the overall success of a sports team over the next 10 years. It didn’t promise fast results—but for the first time, it felt aligned with how I actually wanted to build wealth.

Fundamental analysis felt like the rational brother of technical analysis; it made logical sense to me. Again, I dove into studying for a year. Then, at the end of 2009, I put together the plan that would lead us to financial independence and early retirement.

FIND WHAT’S RIGHT FOR YOU—AND EXPECT TO FAIL

Although real estate and running my own businesses didn’t work for me, I don’t necessarily think they’re the wrong path to financial independence. Just wrong for me. Many people succeed that way. In my case, they just didn’t align with my preferences, aptitude, and demeanor.

Looking back, the difference between technical analysis versus fundamental analysis wasn’t about right or wrong—it was about fit. It took a few years to find what worked for me. And that path to discovery came with painful failures that hurt both financially and mentally.

If you’re just starting out, it might take a while to find what works for you. And expect many setbacks along the way. Just remember that nobody learned to walk without falling down repeatedly. Nobody learned to ride a bike without a few crashes and scraped knees.

Somewhere along the path to adulthood, we learn that failure is a badge of shame. Just think of failure as a fee for education.

I’ll share my knowledge about fundamental analysis in upcoming posts. Perhaps you’ll find it as exciting as I did.

Until then, feel free to leave a comment below.

I’ll see you at the finish line!

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Disclaimer: I’m not a licensed financial professional. This blog shares my personal experiences and opinions around money, investing, and early retirement. It’s for informational and educational purposes only—not financial, legal, or tax advice. Always do your own research or consult with a qualified professional before making any financial decisions.