Forex Trading Tips: Forecast Uncertain

Forecast Uncertain

“How could I not take the Pittsburg Penguins? They’ve won the Stanley Cup twice, they’ve won game seven twice on the road and now they have game seven at home. Of course I am going with Pittsburgh!”

Barry Melrose, ESPN hockey analyst, on the eve of game seven between Montreal Canadians and Pittsburgh Penguins.

Game seven result : In a stunning upset Montreal wins 5-2.

"Predicting is very hard, especially about the future."

Yogi Berra.

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Market analysts receive an enormous amount of criticism for their often incorrect advice, but as you can see they are not the only ones who are wrong. Pick any field and you will discover that the experts often miss the mark. This is true not only in sports, finance, meteorology but in much more important areas of life as well. For anyone unfortunate enough to have come in contact with a neurologist be it for yourself or a family member – you cannot help but walk away from the experience thinking that the whole discipline is nothing but elaborate guesswork. Despite sophisticated equipment and reams of data, neurologists like traders often have no clue as to what’s going on in the brain.

Bottom line is that forecasting is hard. The future is fraught with a million unanticipated variables that often lead your analysis astray. Yet business depends on forecasting. We make a thousand assumptions about the future every single day. What makes trading so particularly vexing however, is that our forecasts are proven wrong sometimes with near instant speed. In business, the folly of our decisions is not evident for months and sometimes years. But the markets will slap you across the face on a daily basis.

Most people simply cannot take the pain and walk away. When I think about the successful traders that I’ve known in my twenty years in the markets, the one element that unites them all is perseverance. Many of the great traders I’ve met are not especially smart or gifted. They are however incredibly disciplined. Even during the worst periods of drawdown they remain committed to their trading plans because they know that returns in the market are made by taking three steps forward and two steps backward. If you are a range trader you will suffer greatly when trend takes over. If you are trend follower you will be chopped mercilessly when range sets in. Those are the only incontrovertible facts of trading. Those are the only forecasts of certainty.

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