I have chosen Beginners Questions to ask this very question - is it possible to predict - to ‘write in advance’ or ‘praedicere’ in Latin.
There is often a general consensus that this is impossible - but why is that, what makes predicting impossible?
Is the impossibility a mindset, or is it fact. If a form of thinking then is it possible to create a different mindset, by focusing on a price chart which depicts the past, does that focus impair the notion of looking to the future.
Over the next weeks/months I will attempt to focus only on the right side of the price chart - not to create a sense of being right or wrong - but to cause thought on how it is possible to see the future
Price movement is not 100% predictable but it isn’t completely random either. In certain situations there are things which price will more probably do, because it is driven by human decision-making.
This conversely means that from time to time, a price will be expected to do the less probable thing in a given situation. This isn’t just bad luck, over a run of situations it is absolutely guaranteed to occur.
The one thing that can be predicted 100% is market behaviour: as long as humans are behind the decisions, this cannot change.
You can only anticipate the future when you see in the present moment the beginning of a pattern that has a high probability of completing to some kind of expectation.
Predicting makes you more like the gambler. The casino doesn’t predict outcomes but the outcome for them is predictable.
Just like a market maker, they dont predict. They leave that up to the traders and most of them lose.
I think the market is predictable. Most traders think it’s not or struggle with trading because they’re following a purely technical strategy. The reality is that the big boys (funds, banks etc) use the news and fundamentals to make their trading decisions, not technicals so we need to be doing the same thing. When you can understand how to trade with the fundamentals, the markets become much more predictable.
To my mind markets are more predictable than it seems to be for a beginner-( from the technical point of view and refering just to single underlyings). If you deal some time in price pattern and statistics ( technical indicators) you will realize, that it’s possible to raise the odds very high to your favour. That comes close to predictable.
But a good example how unpredictable markets in general could be is what happened now when the Corona crisis began and the worst ever economic data were released - if you had told somebody in advance, that SP will rise like a rocket after such horrifying economic data he would ask you if you are still drunken from yesterday’s beach-party….so this was only predictable for a handfull specialists or insiders (primary or secondary insiders)
Yes, the big banks use news and fundamentals to make their decisions. But they have the best brains, the best computers, the most information, the best quality data and the fastest news flow in the world. So are you really saying all we have to do to make a profit is to reach the same conclusions they do in the same time and we do this by watching TV and buying a cheap laptop?
If it was that easy, don’t you think the big banks’ best brains would have told them this?
The market is much more predictable than most traders realize. Price action follows very specific rules. That combined with market structure and related patterns provides extremely high probability predictions.
If investors are purely rational and pretty fast (instant) in making trading decisions - then there is 0 chance that market price will deviate from theoretical price at any point in time. They basically instantly price in all available important information. Hence next “fair price” will depend only on incoming information and not the price itself, hence past price(s) have no predictive power. This is the essence of efficient market hypothesis which is the biggest obstacle to technical analysis. Personally I think that its premises are too detached from reality (we have many dumb traders and investors which make possible for market price to deviate from theoretical).
For a beginner there is no wrong questions, the biggest failure would be a lack of questioning.
Market awareness is vital to every learner, without knowledge of the market present then likely the focus will be left side - selling every double top or buying every dbl bottom - or worse still - buying or selling because price is ‘overbought’ or ‘oversold’.
There are many algos in the market that can influence price. FA and TA are two branches of the one tree. For example FA caused the recent rise in Eur/Usd, then the retrace which was predictable, then the next leg also predictable.
I talked about this link between FA and TA by calling it the ‘perfect market’ in Falstaff’s thread on where is the EU going with this - before it happened
One of the above comments in the thread referred to the present - the market focus is neither the past or indeed the present - the present is fleeting and merely sets the scene for the future.
The virus threat to making money is receding - so risk comes back on.
What do IBM, Disney and Microsoft have in common? Apart from being reputable business names with strong brand recognition? . asked a recent business editor.
The answer: they were all started during times of recession
Sometimes learners become daunted with the thought of institutions and their ‘big brains and capital’
But small guys have a distinct advantage - there is no requirement to be in the market every day.
I remember a pro trader once recounting a lesson when he was starting out - his boss came over and looked at the learner’s trading screens - then the boss flipped it.
What was wrong? - was the trader in a huge loss, did he break leverage rules, what had happened?
The learner was not in the market - he had no open trades.
You are correct that they have access to several institutional level tools and especially in the case of algos, they will reach certain decisions a lot faster than the human mind. However, there are now plenty of resources for us to use as retail traders in order to access news and data as quick as the banks. Two tools which I use are LiveSquawk for real time news flow and MetaStock Xenith, which is a retail version of Retuers Eikon. Costs me around 130 GBP per month and allows us to trade like the banks.
I work for a small hedge fund, which uses the same tools and has returned over 100% over the past 12 months. Now I’m not saying those tools will instantly make someone a profitable trader. It takes a long time to understand how to breakdown the analysis and data but it is certainly possible to do, even at a retail level.
Yes, you are correct. I do not completely disregard the technicals in my own trading but I think many traders put a lot more weighting on it than they should and a lot of the time, the fundamentals will be completely disregarded.
The market is not predictable. This statement is 50%fact and 50%fiction as the market sometimes moves according to our strategies and sometimes a major news can make the market upside down.
So that would mean its predictable. Because if you keep out of trading while major news (a very common practice), the rest of the time would be predictable, right?
I think trading its like poker. You can’t predict or control the next card, but you can decide when to get involved, and a winning strategy means do it when odds are in your favor. I talk about winning odds and pot odds (risk reward ratio). We have to get involved only in trading setups with positive Expected Value
I predict price movements on a daily basis, so it’s crazy to me to even see this suggestion. Markets are extremely predictable, people just don’t understand it.
.so this was only predictable for a handfull specialists or insiders (primary or secondary insiders)