There are plenty of signal services, newsletters and trading rooms that offer forecasts for what the market will do in the coming days, weeks and months. It is a very tempting proposition to give subscribers peace of mind about what is going to happen to the market. Some believe that what the market will do can be seen and subscribers follow these services. Unfortunately, predictions do not exist even though these consultants are predictors. No one can make the right predictions even for 50% of the time continuously, the market is going up or down.
When traders anticipate what the market will do, is it the same as the forecast? The prediction is to declare that something will happen in the future with a single result, and the forecast is to reflect in advance all possible results. Anticipation requires dealing with problems before they get into trouble; something is expected to happen without anticipating the forecast. The prediction tends to take a bias or position, while the predictor has to think well about what might happen: good or bad.
An example of the forecast is when traders are raising prices and approaching an old level of resistance. It predicts that prices may continue or fall. He needs to make preparations to deal with both scenarios. One is to prepare for the break and move upwards, you need to determine at what price the long and stop loss will go. If prices are reversed, it should specify where the short entry will be, as well as the stop loss. These scenarios prepare you for the next price movements, predicting what other traders will do when prices reach resistance levels. If prices predict what they will do, say, it has risen and continues to rise. He has no plans for a possible recession. It focuses only on the upward movement and not on the possible setback or consolidation. These scenarios need to be constantly considered and planned as markets continue to evolve. This mentality makes a huge difference between a successful trader and a losing trader.
Prediction is the game of a loser who feeds the need to be right instead of making money. The ego is often to blame for showing other marketers how good it is to predict the direction of the market. In trading, ego and profitability cannot go hand in hand. If not, most traders will look for a direction and then use the evidence to protect that bias, regardless of the evidence that supports the opposite direction. This bias is heralding the future. He tends to think and then move on. The trade may be profitable, but in the end the trader is so convinced of this bias that where the trade fails, he will have no alternative but to prepare for the loss.
One of the hallmarks of a successful trader is his ability to prepare for all possible results by imagining the scenarios that the market can take, up or down, before he trades. He knows he can’t predict but he can calculate the odds of the market going one way or the other. In anticipating the outcome, he has a plan for one outcome or another. What if the market goes against its position, where does it come from? What if the market is in favor of its position, where does it need to go to make a profit?
Prediction is preparation for two results, good or bad. Calculating how much is lost is as important as winning. This means that the trader will graphically identify the entry point and see the two exit points (stop loss and gain target). By having this method, he can identify his risk-reward ratio and the probability of a successful trade.
So how do we overcome this dilemma? Probability can be found in historical data through rigorous testing, based on the strategies that the trader intends to trade with them. Finding statistics to support the belief that the strategy works will give him the confidence to approach the market and give him a way to predict and predict the results. One way is to look at the market as it shows us by price action or indicator.
Accept that prices or indicators may change direction at any time. Using statistics to make an educated guess, the trader can find out which direction the market is likely to go. But probability cannot guarantee the desired result. This means that a backup plan must be established, which is a stop loss if the desired result does not occur. This is the reason why successful traders are in a position to lose. Stop loss is the decisive factor in determining whether or not the result worked. The trader must accept that the market will always be right and trying to be fair will prevent the trader from joining the market and keeping up with the flow.