Market Forecasting – Is It Worth The Trouble?
There are several different camps when it comes to the subject of Market Forecasting.
There are those that believe forecasting the markets with any kind of accuracy is a fairy tale, a practice based on false hopes and unrealistic expectations.
Then there are those who believe that the markets can be accurately predicted in advance, and share stories about traders of old, like the legendary W. D. Gann, as part of the proof that it can be done.
And then there are those that fall somewhere in the middle, believing that Market Forecasting with a high degree of accuracy, although not 100% accuracy 100% of the time, is possible and can be achieved with the right methods and techniques.
Where do I stand on this issue?
My belief is that of the second group mentioned above, that the markets can be accurately predicted in advance with a steady clip and liking to talk about those who have demonstrated this in the past, but PRACTICING the art and skill of forecasting in line with the last group mentioned above, that expectations should be tempered with cautious approach and that other indicators and methods (MACD, %R, Moving Averages, pre-calculated support and resistance, etc.) should be incorporated before making trading decisions based on forecasting.
For three decades I have focused all my energies on predicting future market turns. Those who have followed my work over the years are aware that my forecasts are highly accurate a large percentage of the time, but of course not 100% of the time.
I have discovered many methods and techniques that provide incredible insight as to what the market will LIKELY do in a few days, or weeks, using actual calendar dates to point to when the market is likely to make top or bottom. But I am also aware that there are methods and techniques not yet discovered or lost over time due to those who have not disclosed their findings and have taken them to their death.
Whether you agree or not whether accurate market forecasting is possible, the question of this article is whether it is ‘worth the trouble’?
In one word, the answer is… YES!
Whether you consider the forecasting of market price action to be the prediction of a future turn date as to when the market will make top or bottom (for which I practice), or that of strictly applying common chart indicators in the effort to anticipate a breakout or general change in trend, the whole point of forecasting is to ‘minimize risk exposure’ while ‘maximizing profit potential’.
If anyone is going to trouble themselves with market forecasting, then clearly that person is going to have found techniques and methods and have proven time and time again to be highly reliable for that very purpose. As we can all agree that no single method or technique is going to be 100% accurate 100% of the time, if a forecasting tool can produce a good amount of useful information alone or coupled with others methods, it is going to be worth the trouble to use.
Traders who are familiar with Technical Analysis are likely familiar with the concept of ‘divergence’, such as in ‘bullish or bearish divergences’ using oscillator type indicators. Obviously divergences are not going to be used to forecast in advance what day or week the market is going to make bottom or top. However, it is a forecasting method of sorts in that it can help the trader ‘anticipate’ whether the market is about to change trend. I personally find this analysis of great value and use if along with my other forecasting methods.
The point is, clearly understanding ‘divergences’ is considered ‘worth the trouble’ to even those who do not subscribe to the idea of forecasting market turns in advance as being possible. Those who have never analysed price action for ‘divergences’ are of course going to be skeptical that it is of any worth, until they put that skepticism aside by seeing how powerful that simple method is. The same can be said about other forms of market forecasting. And this is why it is ‘worth the trouble’ to investigate and learn.
If the goal of the trader is to get into a new market move as early as possible with the least amount of risk exposure and the greatest amount of profit potential, then it is ‘worth the trouble’ to learn all you can to make that happen. Market Forecasting is a practice that falls into that category.