While most of the traders believe that “Predicting” and “Forecasting” are the same, a few ones understand that they are not exactly the same.
Forecasting is a rough calculation of the future value of the price based on past data and solid information. The judgement about the worth of the currency is by purely following a process and formula.
Predicting is somewhat a combination of forecasting and a hunch on where the price will go. Or sometimes, some traders have based their trades more on a gut-feel approach.
In general there is only a slight difference. But, there is a big difference between the two when you trade. When you are emotionally doubtful on your currently open trades and feeling lost, there is a big chance that you “predict” your trade and you “didn’t forecast”.
Forecasting methodologies tend to be the Elliot wave, Gann camp.
The reactionary camp are the breakout out, price must go above (below) a pivot point, fractal, trendline camp.
Another way to look at it is (IMO) if you use market orders, or limit orders you have a tendency to be predicting the price will go in a given direction, if you use stop orders above or below where the market action currently is, you are reacting.
As you said, there are nuances, but I am a firm believer no one can predict where markets are headed next with a high degree of accuracy, but we can react to it when the market tips its hand.
Right. To react to the current situation is one of the best ways to trade, There are uses on past data analysis but analysis as a whole is not all about past data.
I would have no clue how to calculate the future exchange rate between two currencies. But if anyone can do this, it will be the big banks - they’re a lot cleverer than I am. When they calculate the future value will be higher than where it is today they will start buying; they are so big this will cause the price to rise - and that’s when I want to get in.
Even then, I only ever enter trades on pre-set orders. If price in an uptrend does not reach my buy order, the order will not be triggered and I’m just happy to have lost nothing.
I ma not a native english speaker but what is the difference between predict and forcast?
When I place a long trade it is because I expect the price to go up,
When I place a short trade I expect it to go down.
Of course this is a reaction to somenthing happened on the recent chart, some kind of setup made of candlesticks, moving averages indicators.
I expect my ruleset or strategy to have an edge and be better than a random entry.
If I make money my strategy is predictive and fits the market in some way.
But this part of the original post gave me a pointer -
“Forecasting is a rough calculation of the future value of the price based on past data and solid information. The judgement about the worth of the currency is by purely following a process and formula.”
Although when I set a buy order its because I expect price to rise rather than fall, the words calculation, data, information, process ,formula would not be part of my decision-making.
Personally I don’t like the word forecasting or predicting. It conjures up images of fortune telling or tarot card reading.
The talking heads on CNBC are the modern day equivalent.
Even traditional chart patterns technicians are nothing but sooth sayers with a poor record of these patterns working.
I agree with you there must be a catalyst, we may trade in a different way but both approach the market in letting the market dictate how we trade.
It’s a very subtle difference, but the moment you start predicting you marry yourself to market opinion - that can be ok - but many beginners predict and it comes to bite them in butt when their prediction does not come true.
While I’m hardly unique in my thinking i always approach my trade with the belief I have no idea what will happen next.
I’ve reacted to the catalyst, but don’t expect any particular outcome. It’s in the lap of the gods.
If we take our opinion out of the equation most of us would do a damn sight better.
I trade a strategy not my opinions.
Or if you prefer my opinion is that my strategy is profitable so I execute it.
My expectation is to have more money after the next 200 trades.
I maintain the journal before making a trade. I try to understand the market momentum. If we want to keep up with the trends in the volatile market, the opposite result can come.
I like the way you said it. That’s the bottomline of the analysis. I think this is important as most of the trades often hit the SL first before going to the profit point.
There are uses on past data analysis but analysis as a whole is not all about past data.
No one knows where the market is headed. That’s the reality that I learned the hard ways.