Michael Covel’s Take On Predicting The Markets

by Olivier on June 9, 2009

Some people might think your job as a trader is to pick stocks like VEN.TO – Ventana Gold every day. As much as I’d like to be able to do it the simple truth is:  It won’t happen. Although I basically do research 24 hours a day the only thing I can do is to analyze the markets and pick stocks with high potential technical setups where odds are stacked in my favour. Then I let the odds play out and manage my positions. It all comes down to what I’ve already stated quite a few times:

Kill your losers and ride your winners as long as you possibly can.

Some food for thought from Michael Covel:

Michael Covel is the author of two best selling books, Trend Following and The Complete Turtle Trader. While educating his followers on his blog, Michael just finished his first film, Broke: The New American Dream. This documentary not only details the causes of our economic problems, but also features eye-opening revelations from today’s top financiers and traders.

I have no idea what stock, bond, currency, and commodity markets will do over the next six months. How many of the great fundamental analysts had calls that made their clients money over 2008? Not many as trillions of dollars were lost through buy and hold prediction nonsense. Sure, some very smart analysts will get the next six month’s of predictions right, but then again when you flip a coin you have a 50% chance of being right too. Does that mean there is no hope for profit? No. If you can put aside the need to try and predict the future and if you can instead trade as a technical trader, like trend followers who made fortunes in 2008, you will have a chance to make money going forward. Bottom line, if we can’t know the future and if we can’t know what direction any market will trend it is far better to have a plan to systematically profit by reacting to market moves versus a reliance on the false hope of predictions. Trading for profits speech aside, how do I feel personally about the economy? Broke is definitely the new American dream.

Have a great evening!

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