In most endeavors people that claim that they are able to predict the future are regarded with a high level of skepticism. Some of them are gamblers that focus on odds to give them an edge but many are charlatans that fool themselves and others with their supposed ability to predict the future.
The stock market has always been inclined to embrace those that claim to have great predictive ability. What better way to make money than to know the future and to make all the right moves? The large brokerage houses and fund managers make billions by marketing their ability to know what is going to happen years into the future.
I've been a full time trader for a long time and with each passing year I have less respect for prediction as a way to effectively navigate the market. Guessing what the market is going to do at some point in the future is not what generates the bulk of profits. The big gains have always come from reacting to what is happening in the present and developing tactics to capitalize on it.
Many market players scoff at this disdain of predictions. They argue that any time you make a trade you are predicting the future to some extent. That is true but there is a major difference between the long term predictions that the media, pundits and traditional Wall Street love so much, and the navigation of price action that is occurring in the present. We have to predict to some degree but it is the reaction to current conditions that matters more.
One of the most empowering things you can do as a trader is to admit that you don't know what is going to happen. You might formulate a thesis and have some opinions but then you let the market guide you as to the proper course of action.
The current market is a good example of the difference in thinking between those that rely on long term predictions and those that use tactics to deal with the current action. All you really need to know about the current market is that it is acting poorly and is in a downtrend. There are some smart pundits that are happy to tell you why this is the start of a major disaster. There are other pundits that will tell you that this is just a short term glitch and that the market will be back on track fairly soon.
I don't know what the future holds. I can make both bearish and bullish arguments and assign probabilities to them but it is just an educated guess and very likely to be wrong. Things never develop the way that anyone thinks. What I do know right now is that the market is acting poorly and many stocks are breaking down. That is all I really need to know. If I react to that shift in price action then I am in position to react quickly when it shifts again.
Many market players use charts as predictive devices. This or that pattern is an indication that the stock is going to do this in the future. Charts do help you to recognize trends and other factors that impact future price movement but their primary value is as trade management tools. A chart provides a framework for you to develop trading tactics. If this level is breached then you take this action or if a move becomes extended then you do this.
George Soros has said, 'the idea that you can actually predict what's going to happen contradicts my way of looking at the markets'. He also has said, "it's not whether you're right or wrong, but how much money you make when you're right and how much you lose when you're wrong.'
Soros embodies the idea that it is the tactics you use when you are in a trade that matter far more than the predictions that you make.
Predictions are for show. They generate attention, make you feel like you are in control and can be downright entertaining. Sometimes predictions are even correct. However, it is tactical response to current price action that makes you money. Building a big position as a stock develops or cutting a loss quickly when conditions change is what makes you money. It is more work and requires more attention than just making a big prediction and hoping it comes true, but the risk is lower and the returns greater if done right.
Focus on the now. Work on tactics as the trading environment shifts. Smile and nod at those that tell you what is going to happen months or years from now. We'll worry about it when it actually matters.