It’s crystal ball divining season – but remember….. the trend is your best mate

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“It’s that time of year again when the mystics peer deep into their tea leaves, entrails and crystal balls to divine what’s ahead.

Which means it’s also time for my annual reminder: These folks cannot tell the future. Ignore them.

Most forecasters are barely familiar with what happened in the past. Based on what they say and write, it is apparent they often do not understand what is occurring here and now. Why would anyone imagine that they have the slightest clue about the future?

This is not my opinion, but a simple statistical fact: The data overwhelmingly show that the skill set of the predictive pundits is no better than a coin toss. The odd person gets these forecasts about the economy and stock markets right each year, but the lack of any sort of consistent winners and losers means that, mathematically, it is a random outcome.”

what they said

Reap the benefits of understanding chart setups using Technical Analysis

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Identifying chart setups is simply a system for gaining access to high probability stock market trends! Hundreds of years of price charts have shown that prices tend to move in trends. A trend is merely an indicator of an imbalance in the supply and demand of a stock. These changes can usually be seen by market action through changes in price. These price changes often form meaningful chart patterns that can act as signals in trying to determine the beginning, or continuation, of trend developments.

In my experience there are two key trade types:
1. The ‘buy on weakness’ trend reversal trade, and
2. The momentum trade.

The first develops from a reversal from low levels where long term support is showing and or accumulation price action has developed. The ’breakout’ from these zones is often a precursor to a strong market imbalance and trend move.

The second is a signal that forces the extension of an existing trend. These can be very frenetic, powerful, and highly lucrative but must be systematically risk managed to achieve a consistent optimum result.