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A large number of posts on this list are requests
to other traders to share their market forecasts. Having a framework in which to
consider future market scenarios can be beneficial as long as the
trader / investor does not get married to a "fantasy of expectation" about what
the market might-could-should do. Since markets often frustrate the
expectations of a majority of participants, particularly at the turns (after
everyone who wants to buy has bought, the market can only go down), traders
depending on borrowed forecasts should have a plan to limit their
risk. The best traders I know have developed their
own consistent, disciplined, rule based approaches that allow the
market to tell them what to do. After twenty plus years and at
great expense, I have found it more successful to trade what I see on my screens
- not what I or someone else thinks.
I posted the paragraph below to this list
in 2005.
As a long time
member of this list who posts rarely, I want to acknowledge
the willingness
of Ben and others who take the time to share their ideas on
the markets -
they keep us all thinking and they keep the list alive.
However, I believe
Alex has articulated an important idea about trying not
to predict the
markets. Even if one can predict the markets with say, 70%
accuracy
over time (almost unheard among money managers), you will still be
wrong 30%
of the time. This means that any trader who consistently makes
money
from one month to the next, MUST, no matter his analysis or
methodology, be
quick to abandon any preconceived notion or prediction of
what the
market should do and adjust to what the market is doing
now - to
the price action at hard right edge of the chart.
Inability to quickly
change your position and flow with market action,
particularly in the highly
leveraged futures market, is a prescription for
failure. From the S&P
locals who bought the breaks in the Crash of
1987 to the rocket jocks at
Long Term Capital Management, market history is
littered with the carcasses
of those who did not adjust quickly enough to the
reality of market action.
While we can all appreciate a timely and correct
call about what the market
might do, predictions are of no value and can be
potentially harmful if the
trader develops a market bias and cannot
immediately bail out of a trade
that does not develop as expected. I
think this critical reality is often
missed by newer traders and list members
who are seeking insights from
traders that they perceive are more experienced
that themselves.
Jim Alvis
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