Stock Market Forecasting Advice
Stock market forecasting is a discipline that deals with predictions about how stocks will perform in the future. Oftentimes, experts in the market all make their predictions of how they believe not only the market but the economy will perform over a time span which is usually a year. They will put metrics to their predictions and forecast growth by a certain percentage. Those doing trading on their own will look at these predictions and find that some are right and some turn out to be wrong. Stock market forecasting is not an exact science but more of a calculated risk. Here are some considerations to make if you are a beginner in stock trading and want to try your hand at stock market forecasting.
Understand Why Forecasts Go Astray
If you look back at some of the forecasts made at the beginning of a new year and how they turned out today, you will find that some turned out not to be true. Forecasting is a “best guess” to put in bluntly. There are a few factors that work against a predictable outcome such as:
· Calls in the extremes
· Reactions to current fluctuations
Many forecasters are conservative in their predictions while some make extreme calls in the low or high-end of the performance spectrum. This situation, in a way, is like an all-or-nothing proposition. An extreme best forecaster of the U.S. economy gets a lot of recognition when right but not as much when wrong so to these people it is worth the risk.
Inconsistencies stem from the use of the same type of information in different ways over a given time period. Simply put, different people use information in different ways over time. This of course is the human factor.
Other forecasts go astray because forecasters react to current fluctuations in the market. It is a normal reaction but too many reactions could affect the ability to forecast correctly.
Forecasts Tend To Be Accurate In the Short-Term
A study was done on the database maintained by the Survey of Professional Forecasters run by the Federal Reserve Bank of Philadelphia. This database is extensive with forecast information submitted by many experts. A diverse set of variables dealing with financial and economic indicators have also been tracked and used by these experts. The finding was that the forecasts have predominantly greater accuracy when the predictions were made in the short-term (1-2 calendar quarters). This brings attention to the position stated previously about the inaccuracy of long-range forecasts.
Attempting to predict how a company will perform through stock market forecasting requires a solid understanding of market characteristics. If an investor wants to maximize the potential for achieving the highest return, he must be prepared to hold out for the long-term. The best advice requires paying close attention to historical trends in the particular company/industry being analyzed while at the same time not ignoring any potential for error (margin of error). Holding out for the long-term also requires discipline by investors in not reacting to short-term market moves. Finally, a more conservative approach in stock market forecasting is to look at averages. Looking at averages means considering the potential high and low extreme’s of a stock’s performance and determining the middle ground. Taking all these variables together, the stock market analyst can be somewhat reliable in his predictions.
Lama Forecasting uses unconventional technical analysis techniques to offer unique stock market analysis services with accurate results. We forecast daily and intraday turns in advance for the S&P 500 and AEX stock market index. With our services we want to give investors and day traders the ‘edge’ they want over other traders.