One of the most important mathematicians of the 20th century was Claude Shannon, the inventor of information theory. From radar, to digital signaling, to cryptography, all are based on information theory. Information theory can be explained very simply, information leads to the resolution of uncertainty. This key concept can differentiate trader types.
The value of the fundamental trader over technical trader is that he collects more information from a variety of sources. Hence, he should be able to better resolve or explain the uncertainty that is placed before him. Markets may move in some possible trend because of this resolution of uncertainty, but the fundamental trader tries to understand or appreciate how this information impacts prices.
The technical trader will try to strip away the noise surrounding a trend in order to establish direction. He does not try and understand the trend or look for explanations. He is not trying to resolve uncertainty. He is only looking for direction.
The fundamental trader will try and use information to reduce the uncertainty, strip it away, by gathering more information about what could be the key drivers. If he can explain why the market is moving in a certain direction he can gain a better signal on returns. The trend trader does not believe he can resolve this problem. Hence, he focuses on signal extract only from price.
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