how do you predict the future?

rsh01

Experienced member
1,184 299
Which is pretty much what I and New_Trader have said as well. I've found experience to be the only common denominator.

I mean, look, you can find a gamut of styles that go from the mainstream to the esoteric. I was just having a conversation with a swing trader yesterday, and he said that in his couple months as a prop trader he practiced using only stochastics on his screen and no other visual or number whatsoever. This altered his view of the market such that he wouldn't trade without his proprietary indicators. Turns out his portfolio's up 75% in the last three years.

Personally, I couldn't trade like that. So that my take; experience is the only way to have an idea of where the market's going.

-----

I know you're looking for something more specific, but there isn't. Trading is about context. If you see a strong uptrend, best to go with it. If you see a large player gaming the market, best not to fade him. Stuff like that.
Tails
 

ChocolateDigestive

Experienced member
1,153 281
Both of them are a prediction, neither of them is a fact. Geez.
No BBmac is correct. Statement 1 is NOT a prediction. The prediction that any of all the possible outcomes will occur is nonsensical. Statement 1 is a fact. It is like saying I predict that 1 + 1 = 2 that is NOT a prediction it's fact as it can be proven.

You are talking bo77ox.

And before someone asks can I prove that 1+1=2 I can provide a mathematical proof but it is beyond the scope of this thread.
 

Shakone

Senior member
2,458 665
No BBmac is correct. Statement 1 is NOT a prediction. The prediction that any of all the possible outcomes will occur is nonsensical. Statement 1 is a fact. It is like saying I predict that 1 + 1 = 2 that is NOT a prediction it's fact as it can be proven.

You are talking bo77ox.
What if it doesn't land at all. What if someone catches it. What if it splits and lands on both sides. What if it explodes. What if it continues going up into the sky, or out into space.

Or what if the coin has neither heads nor tails on it at all in the first place.

Too many assumptions from you, too little imagination, and far too much arrogance.

It's not a fact according to my understanding of the word, as there are other possibilities.
 
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ChocolateDigestive

Experienced member
1,153 281
What if it doesn't land at all. What if someone catches it. What if it splits and lands on both sides. What if it explodes. What if it continues going up into the sky, or out into space.

Or what if the coin has neither heads nor tails on it at all in the first place.

Too many assumptions from you, too little imagination, and far too much arrogance.

It's not a fact according to my understanding of the word, as there are other possibilities.
now you are just being silly.
 

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hwsteele

Experienced member
1,227 181
I'm talking about directional trading here.

I understand that with arbitrage or spreading against different instruments, you can find one market thats out of line with another and lock in some profit. That makes sense.

But when you trading directionally, you are trying to predict the future. You are saying, "I'm going long here because I think in the future, the buying pressure will overwhelm the selling pressure and price will rise." And vice-versa for short. You need to use your price/volume analysis or indicators or whatever to help you determine that. But how do you do it?

To steal a picture from DT's webinar:

There are so many different ways to do it that it would make your head spin!
By that I mean many different things can give you an edge but only if you see that it does.
What you think about something is the most important thing.
So, maybe a better question would be to ask for other peoples methods of "forecasting" or "edging":cheesy: and then try them on for size.
See which ones you like and work for you.

My personal belief about what is or isn't forecasting most likely won't change yours so I won't bore you with that, but it does TEND to be a little closer to what you seem to think than some of the others.
 

DionysusToast

Legendary member
5,963 1,498
I don't think it is semantics. Acting on an edge and predicting are 2 seperate things. When we act on our edge we are simply relying on the fact that in the 000's of times that edge has set-up in the past it achieved a winning outcome on x % of times When we act on our edge we know and accept that we do not know what will happen next - ie which times will produce winning or losing outcomes...we are not predicting what will happen - we cannot as has already been stated - we are simply playing the edge and if we optimise our money and risk management to the edge then we will make money over any given sample of times the edge sets-up. Prediction would be entering the market beacuse we think we know what the future direction will be. It's more than semantics - there is a difference.

G/L
Again, your argument is purely semantics.

But, if we need to go there, let's first look at what the dictionary says a prediction is:

Prediction

Pronunciation: /prɪˈdɪkʃ(ə)n/
noun
a thing predicted; a forecast:
a prediction that economic growth would resume
[mass noun] the action of predicting something:
the prediction of future behaviour

This says nothing about certainty. If an outcome to a situation occurs 99 times out of 100, then you can forecast/estimate/predict that on the balance of probabilities, it will occur next time that situation occurs.

This is what a prediction is. It is nothing to do with certainty. It is about a FUTURE outcome. It is nothing magical.

Just so we are clear : No body can predict the future - even those that think they can. There are no dissenters to this statement are there ? surely not ?

G/L
Yes they can. People do it all the time. Just not with certainty. Companies use forecasting software to set inventory levels based on seasonality. These companies put their money on these inventory levels.

Not only is predicting the future possible, some businesses would not be able to run without doing so to some degree of accuracy.

How, for instance, do you think that your local Supermarket sets the inventory level of perishable goods when you move from Summer to Winter? Shoppers don't order goods ahead of time. The Supermarkets have to predict future demand. This is not to say that they know Joe Bloggs is going to feel a bit peckish on Thursday lunch time and pop in for a sandwich. They do know past trends. Patterns of shopping behaviour change with the seasons and some broad predictions can be made as to what the impact will be.

Tell you what - I predict that next March, people in the UK will be buying easter eggs. You want to bet against me?
 
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DionysusToast

Legendary member
5,963 1,498
Incorrect.

It is not possible to KNOW the future. If it were, you'd be able to risk 100% per trade!

It IS possible to PREDICT the future.

It's just that some people have confused prediction with knowing. People are confusing predictions with certainty. That is not what a prediction is. That is not what a forecast is.

The whole world runs on predictions. Apple make a prediction of the demand for iPhones in order to figure out how many to make. They also predict how much wastage there will be in the production cycle. They predict how their suppliers will perform to their requests for parts. Without these predictions, they'd end up with huge inventories, long lead times and either massive over supply or massive under supply. The manufacturing industry mostly does long-term planning off forecasts, with people like Dell being a pretty huge exception.

In the case of Dell, they actually pass the forecasting problem to their suppliers which ends up with Dell paying more for parts.

Insurance companies also work off prediction. They price insurance based on predictions.

Predictions make the world go round.

As I said, it's a semantical argument.
 
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the hare

Senior member
2,949 1,283
Insurance companies also work off prediction. They price insurance based on predictions.

Predictions make the world go round.
all good points, but some problem domains have nice stationary data and lend themselves to prediction, other things (like weather) are more chaotic, and more problematic. I suppose semantically both are still prediction. If you extend that argument to extremes it could be possible to predict and achieve results which where no better than random chance (and lots of traders probably do without even realising it), and the act of prediction, would then make it prediction.

Its like something becoming art when you put a frame around it, it becomes prediction when you believe that you are engaging in prediction. Most traders measure success in profit or loss, rather than the quality of their predictions, and I suspect that many dont really think if their predictions are significantly different from random chance anyway.
 

ChocolateDigestive

Experienced member
1,153 281
Again, your argument is purely semantics.

But, if we need to go there, let's first look at what the dictionary says a prediction is:

Prediction

Pronunciation: /prɪˈdɪkʃ(ə)n/
noun
a thing predicted; a forecast:
a prediction that economic growth would resume
[mass noun] the action of predicting something:
the prediction of future behaviour



This says nothing about certainty. If an outcome to a situation occurs 99 times out of 100, then you can forecast/estimate/predict that on the balance of probabilities, it will occur next time that situation occurs.

This is what a prediction is. It is nothing to do with certainty. It is about a FUTURE outcome. It is nothing magical.



Yes they can. People do it all the time. Just not with certainty. Companies use forecasting software to set inventory levels based on seasonality. These companies put their money on these inventory levels.

Not only is predicting the future possible, some businesses would not be able to run without doing so to some degree of accuracy.

How, for instance, do you think that your local Supermarket sets the inventory level of perishable goods when you move from Summer to Winter? Shoppers don't order goods ahead of time. The Supermarkets have to predict future demand. This is not to say that they know Joe Bloggs is going to feel a bit peckish on Thursday lunch time and pop in for a sandwich. They do know past trends. Patterns of shopping behaviour change with the seasons and some broad predictions can be made as to what the impact will be.

Tell you what - I predict that next March, people in the UK will be buying easter eggs. You want to bet against me?
I believe what BBmac was getting at was that nobody can predict the future with certainty.
 
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Joules MM1

Established member
645 142
Would you like my system? It's free to anyone who wants it and it will predict the future over 90% of the time.
:p
cool ,i've always wanted 90% of the future, so, could you just let me know which 10% you screwed up so i can avoid it ?

thanks, in advance (of course, well, 90% in advance)
 

bbmac

Veteren member
3,584 787
The thread starter in his original post said/asked:

'...But when you trading directionally, you are trying to predict the future. You are saying, "I'm going long here because I think in the future, the buying pressure will overwhelm the selling pressure and price will rise." And vice-versa for short. You need to use your price/volume analysis or indicators or whatever to help you determine that. But how do you do it?...'

The above quote was the thread starteers assumption and question in his 1st post. Whether or not you agree re his terminology in the post re prediction etc (well covered as the thread went off on a tangent) the general assumption is correct but the question highlighted in bold remains......The answer is that there are many ways- you gotta find the one that suits you if you intend to trade directionally. I am not sure that anyone is going to reveal every detail of their own 'directional trading' trading edges on an open forum.

My general answer is that you don't have to predict you can develop an edge for this type of trading instead. A simple buy/sell the pullbacks in a trend is one way of developing an edge for example -apply some methodology to that and find trending markets/instruments and you are at least trading with the overall flow. For eg identify an overall price action trend (ie HH's, HL's in an uptrend and LL's and LH's in a downtrend on a t/f (intermediate t/f) - ensure that the t/f above is trending in this way too (longest t/f,) then drop down a t/f from that the intermediate to a shorter t/f and await a pullback having identified the areas on the intermediate t/f where buy the dip/sell the rally participants may get involved in the trend again at a discounted price after such a pullback...see what price action does on yuour shorter t/f at these areas and act acordingly. Broken support/resistnace fibs and ttrend lines as well as for some - pullbacks to MA's may figure in your analysis.


G/L
 

wekim

Junior member
36 7
bbmac, thanks a lot for helping get this back on track. :)

But how do you do it?...'
The answer is that there are many ways- you gotta find the one that suits you if you intend to trade directionally. I am not sure that anyone is going to reveal every detail of their own 'directional trading' trading edges on an open forum.
Yeah exactly, yes I worded it poorly but I thought I'd get more responses this way.

My general answer is that you don't have to predict you can develop an edge for this type of trading instead. A simple buy/sell the pullbacks in a trend is one way of developing an edge for example -apply some methodology to that and find trending markets/instruments and you are at least trading with the overall flow. For eg identify an overall price action trend (ie HH's, HL's in an uptrend and LL's and LH's in a downtrend on a t/f (intermediate t/f) - ensure that the t/f above is trending in this way too (longest t/f,) then drop down a t/f from that the intermediate to a shorter t/f and await a pullback having identified the areas on the intermediate t/f where buy the dip/sell the rally participants may get involved in the trend again at a discounted price after such a pullback...see what price action does on yuour shorter t/f at these areas and act acordingly. Broken support/resistnace fibs and ttrend lines as well as for some - pullbacks to MA's may figure in your analysis.
So it seems you are giving an example, similar to the first few responses, of finding a trend and riding with it. You give some technical examples of how to identify a probable set up.

Sometimes I find it difficult to determine when a trend will continue and when it will stop and reverse. What if I enter a "pullback" but it turns out not to be a pullback but the top end of the distribution cycle where price ultimtaely stalls and starts to reverse the trend? How do you determine this? And where does the confidence come from? Is it just subjective experience again?
 
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