What are you playing - the pricing or the valuation game

Aswath Damodaran, the renowned professor of finance at the Stern School at NYU has done a good job of comparing two approaches to looking at asset returns, the pricing game, and the valuation game.

The pricing game is based on the belief that price is the only number that can be acted upon. You don't know the true value of an asset so follow the trend. If prices seem to be moving to an extreme relative to past behavior use that as basis for spread trading. This is the basis for technical trading. 

The value game is based on the belief that an asset can be given a fair value. Find the fair value and use that as the basis to trade. When value is low relative to current prices, buy and when value is high versus prices, sell.

I like this comparison because it is an easy guide to describe the type of traders in the market. Of course, there are hybrids that have the features of both. Similarly, this framework can be used to describe quants and discretionary traders.