How come ... ... weather prediction is so accurate ? I mean if You look at the similarities between stock market and weather - both are chaotic systems; the last can be predicted - with a big certainty at least for a day in advance - and the former not ? Or let's turn the idea around. If You are capable to forecast the weather for tomorrow, shouldn't You be a good trader then, too ? Or turn it around again. If You train Yourself to forecast the weather, wouldn't You at the same time become a good trader, too?
Maybe you are seeing different weather reports than I do. I am not sure. I say this because I do not believe weather forecasting is all that accurate. Weather forecasting has a long way to go to become reliable. I can see weather forecasting and market forecasting on the same level. Some meterologists are better than others. Some gurus are better than others. Weatherman calls for rain tomorow. It don't come. Guru calls for a rise in the market tomorrow, it don't happen. The rain comes 3 days later. The rise in the market comes 4 days later. This sound familiar to anyone? When all is said and done, both of these guys are just hit and miss. Carry on...
There is probability in weather forecasting. Nowadays You have about 85% probability the forecast for the next day is correct. Don't listen to only one weather forecast. Take three weather reports from three sources and stick to the two coinciding forecasts. Then You get 85% accuracy for sure (so to say...). And man, 85% accuracy is way much better than anything I can produce myself in the market ... !
Because forecasting the weather doesn't change it. Forecasting markets affects the actions of the people who make up the markets thereby changing the forecast. Constantly. A predictable market is a dead, ineffective one. Goods and services will change hands on the black market if the usual ones are regulated into predictability.
The market is not a deterministic inanimate peice of matter... It is just as much a living breathing organism as all the particapants involved... It is organic! Nice post Chasin
I read an interesting little tidbit of information once. If you predict that tomorrow's weather will be the same as today's weather, you will be right more than the average weatherman. Too bad trading isn't that easy.
chasinfla, that's a good point. I totally agree with You. If the market is predictable, and may it be only for a day in advance, then players would try to manipulate the market in a way the prediction would become ineffective. But then again, the market is a chaotic system and maybe You know the butterfly effect. In weather forecasting it is assumed that even if a butterfly flaps its wings in China it can effect a hurricane in Florida months later. Translated to the stock market that is comparable to buying and selling one stock on a certain day on a certain second. And months later You get a bull market. I mean ..., would this be IN-EFFECTIVE ? And all the other players may buy stock on certain time points, too, and also work on the market. And then You sum this all up and then You get a chaotic system again, with a degree of predictability like the weather. It seems to me that in analogy the market must be predictable, too, and we traders are just some kind of butterflies ...
85% probability? Says who? You have any research links to back this statement up or was that just some number that you made up? Not trying to be a smarta$$. I've just never heard of that before.
You bring up an interesting point. First, neither systems are understood well enough to predict. Second, nobody but sports gamblers risk money on the weather forecast. Third, each system has its paramters. For an example, some parts of the country (market) has different rates of weather change than others. Here in San Diego, if the forecast is for 68 at the beach it maybe not be 68 but it will not be 88 or 58. In other words weather will only be off by a certain "degree". Markets too. You may forecast it go to up by one percent tomorrow, it may not go one percent but it will not be down by 10 percent. Actually weather is much easier to predict than the markets because when you predict the market you are predicting human behavior. There is an "intelligence" behind weather but it appears to more behaved. Imagine if you will a hurricane with a "brain". Now predict that!! lol. John