PREDICT OR TRADE THE MARKET?

There are two kind of animals of investors. One is the trader and other one is the analyst who always forecasts and want to predict the future. I met a few years ago a super smart guy, who was the best analyst I have ever seen. But the problem was when he started to trade with real clients money he lost all the capital always. He was good at paperwork and his ideas were brilliants, but he couldn’t make money at all. He just didn’t trade, he forecasted and he believed always his predictions and stuck for them. Which did cost big money.

I know most of the companies, traders, investors, anchors, advisors ... etc. love to forecast and predict. Why? Two reasons. One is a marketing. They need to communicate and promote their services. So that is a business side. The other thing that they are convinced that what they trade is the best trade ever. I made thousands of predictions in my trading career and I was sure that I am right. This is the mental side of trading. We like to focus on the positive scenarios and ignore the risk of damage. In the last couple of years my attitude has totally changed and I don’t want to predict anymore, I only want to trade the market. I bet and see what happens.

Nowadays I found that everybody predicts for 2014 in terms of SP500, some forecaster says in 2014 the SP500 will be at 2014. This morning I saw a guy who said in 2014, the SP500 will hit the 1,890. Marc Faber a few days ago said in the interview SP500 will drop in 2014, 20% at least. Honestly all three guys are good and smart traders. Who is right? We don’t know obviously we can place the verdict only at the end of 2014. But I am sure about that they don’t have any crystal ball or holly grail. So, I am pretty sceptical, my thought is that all the forecasts are worthless. We don’t know anything about the future, we are all just guessing. Some prediction will closer some will be far from the reality.

As John Bogel once said „Nobody knows nothing” I love this quote. If you accept this statement you will never be disappointed if you lose. This is the part of the business. Try to never predict just trade and hope for the best, but plan for the worst. How can you do that? If you see a bullish market as now the SP500 just be bullish and stay in the profitable position as long as possible. Keep that position as high the market goes up. Believe me nobody knows where the top of the rally is.

The worst part of prediction that we like to listen to them. Cause we are frustrated about the unsure market conditions and moves and we love to find some guru or guidance. Don’t use any guidance just use your sober mind and make decision on your own ideas. Don’t listen to anybody because it is your money, your loss and your gain.

Have a good trade for 2014!

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The BFM Assets Team.