Post by ck4829 on Dec 28, 2016 13:51:11 GMT
Every year around this time we start seeing Wall Street strategists' predictions for the year ahead. It is easy to understand why the business media cover this, but the practice can be dangerous.
All you really need to know is that no one, and I mean not a single person in history, has ever accurately predicted market action with great consistency. Some will get lucky and make a good prediction now and then, but it is luck and not skill. There isn't one who calls the twists and turns year after year.
The danger of this game is two-fold. Firstly, the fact that so many big-time strategists engage in this exercise makes people think there actually is some way to make these predictions. It also makes some people think that since they aren't able to do it then they won't be very good investors. That is just plain wrong. Good trading and investing has very little to do with long-term prediction.
The second issue is that once you start to take this sort of prediction seriously you have a vested interest in being right. If you predict that the market will be down for the year then you will always be looking for things to verify your bias. This is called confirmation bias and it can play havoc with your trading once it takes hold. You will focus on finding the negative spin and will constantly fight positive action.
realmoney.thestreet.com/articles/12/27/2016/beware-predictions-and-confirmation-bias
All you really need to know is that no one, and I mean not a single person in history, has ever accurately predicted market action with great consistency. Some will get lucky and make a good prediction now and then, but it is luck and not skill. There isn't one who calls the twists and turns year after year.
The danger of this game is two-fold. Firstly, the fact that so many big-time strategists engage in this exercise makes people think there actually is some way to make these predictions. It also makes some people think that since they aren't able to do it then they won't be very good investors. That is just plain wrong. Good trading and investing has very little to do with long-term prediction.
The second issue is that once you start to take this sort of prediction seriously you have a vested interest in being right. If you predict that the market will be down for the year then you will always be looking for things to verify your bias. This is called confirmation bias and it can play havoc with your trading once it takes hold. You will focus on finding the negative spin and will constantly fight positive action.
realmoney.thestreet.com/articles/12/27/2016/beware-predictions-and-confirmation-bias