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It has been implied that trading using forecasting information is not
valuable. I wish to submit a counter opinion.
I have been making public forecasts to the realtraders list since 1998 and
have demonstrated a reliability of 78.5 % and an accuracy of +/- 0.905
trading days. This data is on the DJIA where 121 forecasts dates were made
in advance. 95 resulted in reversals within the +/- 0.905 days. I have also
posted a trading diary on my web site showing how real trades were conducted
using this technique. The current quarters forecast is also available on the
site. (Since I have stopped commercial activity on the site, I believe it is
ok to post its URL since I'm not selling anything).
Since nothing regarding the markets is 100% accurate, there are a few simple
rules to follow in trading a forecast. First, the market must confirm the
reversal by it's price action. I thus set my entries at just above the high
of the lowest low bar, if going long, or just below the low of the highest
high bar, if going short. This confirms for me that sentiment has changed
and there are willing buyers or sellers in the market. This also qualifies
the risk of the trade as the difference between the entry price and the
pivot extreme high or low.
Second, I protect myself by placing stops. My stops are placed at the
opposite extreme of the pivot bar because if price goes there, I know I am
wrong on direction. Historically my studies of hundreds cases shows that
outside bars occur about 15% of the time so I may be stopped out at that
rate.
I also believe that the price extent of a reversal is non forecastable
consequently, I am very quick to take profits on a trade, often leaving much
on the table. ( I challenge anyone to provide statistical data on the
accuracy of a price forecasting technique.) These methods have demonstrated
a profitability rate of 80 to 90% which when compounded provide excellent
ROI.
My market model is one based on dynamic cycles and impulse theory and can be
reviewed at the site.
In summary, I believe I have demonstrated that accurate forecasting
information can be used profitably.
Jim White
Pivottrader.com
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