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I personally think that there is a very BIG difference between making
predictions and trading.
Of course, every time we make a trading or investment choice we
implicitly are predicting that we shall make money. I do not think
this is a very interesting definition of the term "predict". To say
that a person putting on a trade is making a prediction in this sense
is simply to say that he or she is not a masochist or some more
serious sort of psycopath, in other words, that he or she is not
crazy.
A much more appropriate use of the term "prediction" in markets is to
use it to mean "unconditional forecast". For example, if today I say
(to myself or to this list) that the S&P is going up this week, or
going up to 1200, or going down to sometime during the next six
months, I am making an unconditional forecast. If on the other hand I
make the same statements but add the qualification "unless my
indicators start telling me something different" I am no longer
making a prediction in this stronger sense.
This distinction is not simply a question of semantics and of the
meaning of words.
A successful trader's principal committment must above all be to
making profits over the course of a month or of a year. In my view
this means that he or she is committed to following his or her
indicators without reservation because this is the only way to
maintain a consistently "unbiased" attitude towards the market.
There, a successful trader NEVER makes unconditional forecasts
because, at least in the privacy of his own thoughts, he knows that
he may well be forced by market developments to change his mind
before his old forecast comes true.
On the other hand, an unsuccessful trader usually makes lots of
unconditional forecasts and refuses to alter them in response to
changes in market conditions.
So to summarize, unsuccessful traders typically make lots
of "predictions" = unconditional forecasts, while successful traders
never do.
Carl
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