A lot of my customers asked this question, like other traders, so I just want to talk about it. Many commercial systems and almost all the analysis on market trends and seek to predict, if you want to predict the future behavior of the market. It does not matter whether the trader uses fundamental and technical analysis, if his opinion is formed, therefore the trader tries to predict the behavior of the market.



Some use the Elliott wave theory, some rely on economic factors, but the main objective is to assess where the market price will at some point in the future. These types of analysis may, from time to time, be quite accurate, but not always. As traders and people, we will always have opinions and ideas based on our belief that we have experienced. Regardless of how strongly we do not have opinions, we can not seem to help themselves do not have them.



As traders, we should be interested in how we use those opinions, projections and beliefs - it is a fairly important issue. Since the market does not care about our opinion, first and foremost that it is necessary to understand - is that all these views, or projections about the markets are nothing more than as fantasies because, at present, they do not exist in the real world.



We want to trade fantasies? It is obvious that no! But how can we use these forecasts to help themselves to trade rather than to harm yourself? This is extremely important. Let me cite a few examples and analogies as to how predictions can help or harm you.



Let's say you believe, based on forecasts made on the Elliott wave theory, which some market instrument is going to start upward trend. Even MACD shows a positive divergence. You say to yourself: «I buy here and I will wait».



It takes some time and rather than start their upward trend, our market-based instruments down. You tell yourself that you have entered the market too early, but that you are confident that the market will go up very soon, so you decide to hold the position for some time.



With the following tool bar, the market goes even lower, and now you really volnuetes. Bull divergence in the MACD is still present, and Elliott wave analysis remains the same, but looks as if this movement was down the last: «market noise», calms you are yourself. In doing so, you think, «can not go much below the market», and so you hold the position further.



Then the market price of the tool drops, you panicked, close their position and ask themselves how such things could happen? The answer is that it happens all the time with traders, who trade based on the forecast, rather than the actual market action!



In this example, the trader holds on to his imagination, based on his prediction. His faith in his outlook has meant that he did not place a protective stop-order, which is typical for traders locked in this type of trade is forecast. In the end, the ego also plays a role.



Now, let's take that same example and show how one can and should use market forecasts to their advantage. Rather than just buying a market instrument for the current price at the moment, based on its positive forecast, we are waiting until the market shows signs of actual tool change its downward trend.
We feel that, based on our forecasts, this marketing tool will soon spread, but the current reality shows us that as long as this does not happen. Thus, we have a purchase right now, but instead wait until the market-based instruments will not show signs of actual power - we, as traders «sell on the market, rather than on forecasts». However, we use the forecast to prepare and keep the market-based instruments in our list of possible opportunities for the future.



I want you, as traders looked at the forecasts as to the assistance of the trade, rather than as a direct reference to action. That's why it should become one of the tools in your technology arsenal.



Use the following analogy with the reflection of projections:
Do you plan to walk under sail during the day. You check the weather forecast, and it was not good: expected heavy rain and wind. You have a big boat, you are an experienced sailor, and you decide to still make their walk.



When you leave the dock, the weather, as predicted, gorgeous - sunny and only a light breeze. Now, I ask you, even if the forecast is expected to heavy rain and wind, you could put your raincoat right now or to wait until the weather does change? I think most of us would be waiting for the actual changes in weather conditions.



You can also set a sail boat to match the current weather conditions and the actual wind, but not predicted conditions that might occur, but could not. If you lift the small storm sails now, your boat will not be able to swim with the current light breeze.



When weather conditions change, you change his clothes, and sails under the weather! Seaman, in this example would use the forecast to be prepared for a possible worsening of weather conditions, taking the raincoat and the sails.



The same goes for trade! Regardless of whether a forecast of market movement, make a corresponding note, but the deal based on current conditions and be prepared to make if the conditions change. In other words - «deal on the market, rather than the forecast!» Or, you can rephrase it in another way - «Live in the present rather than future or past!»

Source:www.forexarena.blogspot.com

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