PREDICTING THE MARKETS
Discontinuing the use of the old technical indicators, our technical trader now
begins to flirt with the Elliot Wave theory, W.D. Gann techniques, and
Fibonnacci Targets and Retracements. These techniques generally claim to help
you predict when the market will be choppy and where and when it should be
bought and sold. He does all of this studying so he can learn to stay out of
choppy markets. It makes a lot of sense. Someone out there must know when the
markets are going to go sideways and then step aside waiting for the next big
trend. When the trend comes, they get on it and ride it for big profits. They then
exit and wait for the next trend. He hears promises that he should be able to
forecast all of this by using these predictive techniques.
Unfortunately, after several seminars, our trader tries to predict a corrective stock market and ends up mistaking it for the next big wave up. He explains to his
friends, “I missed the big move because I thought we were in Wave B but the
market was really in Wave 2 ready to start Wave 3. If I had just used my old trusty
indicators instead of trying to predict the move and waiting, I would have made
big bucks.”