The scariest people stock, futures, forex and commodity traders have to deal with are the “forecasters”. These are usually the talking “experts” on television, who claim to know exactly where a market is headed. If you are trading any instrument, it is absolutely necessary that you avoid these people. So who are they, why are they popular, and why should you avoid them?
Who are the predictors?
Predictors are people who obviously predict, or rather, TRY to predict the future. Whether it’s stock market direction, cattle prices, or interest rate calls, there’s no shortage of people willing to voice their opinion.
What is really harmful is that many of these people are on television, radio or the Internet. Therefore, they have an illusion of authority, of knowing more than you or me. They sound extremely believable and a part of you may feel uncomfortable doing the opposite of what they say. After all, they wouldn’t say it unless they believed it, right?
But, the simple fact is that probably 95% to 100% of forecasters don’t have any special ability to see the future (maybe there are some true forecasters out there). They can just talk about it, with others listening. Think about it, if someone really knew the direction of the stock market from day to day, wouldn’t they soon be the richest person in the world? It’s similar to psychics going bankrupt: shouldn’t they (of all people) have predicted they would fail before they started?
Why are predictors attractive?
Let’s face it, the world is a complicated and chaotic place. Absolutely terrifying, even. Most events seem random, and that makes almost everyone feel uncomfortable. People who predict, however, appear confident and knowledgeable. That kind of person can be comforting in stressful times.
The problem is that the predictor does not have the actual ability that it claims. What’s even worse is that the more boldly some utter their predictive powers, the less likely they are to be right.
Why you should avoid predictors
NO ONE CAN CONSISTENTLY PREDICT THE FUTURE. YOU WILL GO BANKRUPTCY ACTING ON THE PREDICTIONS. (Repeat this out loud 3 times)
How to handle predictors
The easiest way to deal with predictors is to simply ignore them. Disconnect from the talking heads on TV and the so-called experts on the Internet. Trade without depending on the predictive ability of yourself or someone else. It’s hard to do this while you’re in the middle of an operation, but it’s essential to your long-term success.
A good trading system that responds to the market, rather than predicting the market, is a great first step. Combine that with proper money and risk management, and your chances of success are greatly increased.
And that’s not a prediction.