There are four reasons why these forecasting methods do not work in the real world:
1) The wave assignments are always made after the turning points have formed. They are a pretend crystal ball that only shows events after they have happened, not before.
2) Such software keeps changing the assignment. For example, if a top was assigned as wave “3,” but after a few bars, the market kept moved higher, the software would erase the assignment for top point “3.” In addition, this approach often uses “sub-waves” to “explain” discrepancies. Between waves 1, 2, 3, 4, 5 there are sub-waves called a, b, c, d, e etc. And all these assignments are made after the fact. There is really no value in trading by following such signals.
3) Any price projection must have an “origin.” But the origin is normally assigned after the fact. For unknown out-sample charts, there is no way to know what the origin should be. After the fact, people always can explain why the top should be here, and bottom should be there. Some books show how well a price projection was. They explain that going from price A through an origin O, you may get a price projection B. However, this picture was created after knowing all the factors. In real-time, one would have no way of knowing the location of origin O as shown in the chart below.
4) Another type of forecasting involves the use of “average value.” Some trading software claims 80% accuracy using this method. Our question is: 80% accuracy of what? You should ask yourself the same question. Those software providers use some common “tricks” to make this claim. They either forecast an average value or use “in sample” data for their forecasts. This is highly misleading. First, average value means nothing in a specific trade. Prices might fall first, and then go up. Or prices might rise first, and then go down to reach the same average value. “In sample” data means the data that’s being forecast is itself used in the forecasting calculations! This might seem complicated, but its meaning is simple: when this type of forecasting is applied to actual data to forecast future price movements, it will fail.
Fortunately, AbleTrend method only knows the past and now. The most significant difference of AbleTrend from “Forecasts,” “Predictions,” or “Targets” is that all the signals of AbleTrend just try to tell you what was observed and analyzed from the historical and current market data. It is not a prediction for anything. It just converts the market’s movement to straightforward language: the trend direction — up, down, or sideways — and the location of the key support or resistance. Here is an example of a recent stock chart with AbleTrend:
In the upcoming blog we’ll discuss about the psychological preparation for trading.
The best way to learn a skill using trading software is by practicing it. Though the webinars and free one on one trading sessions will help you to prepare for actual trading on the live markets, it will not tell you how your psychology will react to the experience. This insight is gained only through experience, so give AbleSys trading indicators a try today. To get extra 10% off for AbleTrend 7.0 30-day trial, here is the code: WTMF10 (order online).
You may also learn more about AbleTrend on our blog: blog.ablesys.com
And watch archived sessions from our introductory and member’s webinar series:
Click here to view our youtube page
I welcome your feedback. Did you like today’s message? What other topics would you like to see? Please let me know at gracezh@ablesys.com
If you are an AbleTrend user this is a great time to share and introduce this great tool to your family and friends for the prosperity of 2016 and the years to come.
Happy Holidays!
Grace Wang
AbleSys Corp.
gracezh@ablesys.com