What's wrong with predictions?

[Caseynotes]

So you've got a strong feeling you know where the market is going to go, commentators have called it, signal services have signaled it, paid for pickers have picked it and you have been shouting it from the roof tops.

It's a cert, what could possibly go wrong?

Well everything actually.

There's lots of talk about 'the smart money' banks, institutions, pension funds and the like but not much about the others side of the coin, 'the dumb money', why is that - it's because they just aren't influential to the market. The collective size of the dumb money is dwarfed by the big money to the point of being irrelevant.

The smart money employ their own analysts and indicators and keep them closely guarded, everything you find on the internet is directed at one group only and it's not the smart money. So no matter how correlated and confluenced everything you find on the internet may be the dumb money as a group are still unable to move the market.

So all the power lies with the smart money and they are only interested in battles amongst themselves and are certainly not listening to your commentators or signalers or your pickers or to you.

So why bother with any of it? Because you are needing guidance, why? Because you can't actually predict what the smart money is going to do.

The solution is obvious, don't even try to predict. Watch the smart money battle it out over a significant level, when the battle is over the loser will retreat back to the next significant level while the winner marches on to the same. Your job is to follow in their footsteps. Predictions have nothing to do with it.

Occasionally spontaneous battles will break out on new news, fine, the rules are the same, don't guess, wait and be ready to move once the winner becomes obvious.

On all dumb money forums (all forums) you will always find some making their predictions, listen at your own risk, when they are wrong 50% of the time you can be sure of excuses and disclaimers.

 

 

[trade247]

Which is why that COT data you talk about a few times is so important. Really think there should be more talk about it and for traders to properly understand what is going on / whats shifting at the institutional level.

Great article and food for thought.

[Caseynotes]

you are right @cryptotrader, the COT data is an excellent free weekly resource and very easy to interpret. Take a look every Sunday or Monday and see how the large speculators, who are the registered traders for institutions, banks, pension funds etc, have shifted their positions on a week by week basis. It usually takes them a lot longer than a week to complete the big moves so there is time to get in and follow or at least reconsider standing in their way.

For example looking at the audusd chart below, large speculators went net short in April and rode the market down adding to their shorts all the way into November when they started unwinding their positions though still remain net short as of the last report.

Aside note, unfortunately there has been no COT data due to the US gov partial shutdown since the end of December.

https://cotbase.com/ 

[Guest adrazz]

On 16/01/2019 at 15:36, Caseynotes said:

you are right @cryptotrader, the COT data is an excellent free weekly resource and very easy to interpret. Take a look every Sunday or Monday and see how the large speculators, who are the registered traders for institutions, banks, pension funds etc, have shifted their positions on a week by week basis. It usually takes them a lot longer than a week to complete the big moves so there is time to get in and follow or at least reconsider standing in their way.

For example looking at the audusd chart below, large speculators went net short in April and rode the market down adding to their shorts all the way into November when they started unwinding their positions though still remain net short as of the last report.

Aside note, unfortunately there has been no COT data due to the US gov partial shutdown since the end of December.

https://cotbase.com/ 

This is really great info, thanks for that!