Trade for profit, make forecasts for glory

Last time I made some precious conclusions about how to utilize Dynamic trading in profitable trading strategy. Although there is a difference between trading and making forecasts, it is not quite obvious. That’s why I’m going to explain things once again.

Forecasting by technical analysis methodology is concerned with using historic data in order trader to be able to predict future prices or market behavior in terms of pattern kind.  The aim is identifying a place in the future where trader could put on a reasonable trade or where to exit a trade with an acceptable profit. This is a risky job.

Making forecast, trader already has an expectation about next market activity. This expectation often goes into a conviction. And here is the first mistake. The first trading rule is broken.  Traders can afford to have an opinion about market activity, but they must not be convinced. It is best said by John Keynes:

“The market can stay irrational longer than you can stay solvent”.

My trading experience proves that forecasting has nothing to do with trading. Everyone who tries to trade his or her forecast by means of technical analysis takes huge risk to suffer many unsuccessful trades.  It turns out that forecasting is for academic experts and non-trading analysts.  Traders use technical analysis to collect practical information which helps to spot places at timeline where probability favors greatest opportunity for taking trading profit.

Dynamic trading uses particular technical analysis methodology and its objective is measuring current price position in regard to recent market activity.

It isn’t wise taking action before the events. Only market behavior must leads taking trading decisions.  Trading rule number two describes all of this: trade market behavior, not forecast.

It is crucial trader to cope with his or her greed and ego in order to carry out trading task by taking rational decisions but not emotional ones.  Trading success doesn’t depend on well done forecasting. It’s a question of disciplined execution of a good trading plan.

Unfortunately, no one can tell in advance with certainty when the market will offer a trading opportunity.  It could be difficult presenting my trading strategy live on the blog. So I’m going to describe trades post facto.

There is a question of trading, not forecasting

I haven’t had a post recently not because I gave up or because my trust in Dynamic trading has been shaken. I realized that  I’ve moved away from my purpose to show how Dynamic trading can help a trader to take right decision. I focused in forecasting probable market direction and making predictions about the extent of price movement instead.

Actually, Dynamic trading has power which one can use to make correct forecasts in particular market conditions. The goal is trading, not forecasting. Traders don’t have to care about future market position.  It is only current market behavior traders have to be interested in. Dynamic trading true worth is its market position analyzing technique, in terms of time and price, which allows having trades with greatest probabilities for success.

Robert Miner gives definition of Dynamic trading achievement in that way:

“One of the important objectives of Dynamic trading is to project the extent of trends and the time and price of trend reversals in advance.”

With all respect to the author, I think a definition like this brings back into the field of forecasting and contradict the principle of trading market behavior not the forecast.  The importance of Dynamic trading is concerned with getting opportunity to define current market position in order to find place where to put on a reasonable trade.

In this regard I have been working up a trading strategy based on Dynamic trading concept about three dimensions of market activity – time, price and pattern. Taking projection techniques with other technical analysis methods help identifying right places where to consider a trade.    

I hope to find out proper means to present all this information to people interested in trading financial markets.

Keep tracking next blog articles.