Trading vs. Forecasting

Trading has made you money. Trading is not forecasting.

Trading is all of these:

  1. Selection (choosing your instrument)
  2. Timing (entry and exit)
  3. Money Management (position sizing, stop loss protection etc.)
  4. Psychology (controlling one's emotions)

Forecasting is:

Cycle analysis (seasonals, fixed, expansion and contraction), gann wheel, empirical models, Non-linear models, Fibonacii time/price projections etc. to arrive at likely CIT times and prices. Forecasting is a skill which when used properly impoves item number two on our trading list... timing. It also can help with item 4... psychology, by improving our confidence (provided that expectation kept in stochastic perspective). Last but not least, forecasting is fun.

Timing (and in turn forecasting) is the least important aspect of trading. Katz and McCormick (in their book: Encyclopedia of Trading Strategies) proved that (in theory) traders can make money even with a random entry is used. Why used a 200 dma when a flip of a coin will do?

Any respectable Technical Analyst will advise you against trading the forecast.