Stock Trading

How Not To Call A Market Top

People love to make predictions about the future.  Nowhere will you see this happen more than in stock market.  Jon Boorman shows us why that’s  a bad idea.

If you’ve been reading RetailTRADER for a little while you should know that you should never be trying to predict where the market goes.

You should not be predicting market direction because the future will always remain unknown.

Because it’s the future. And, I hate to break it to you, you can’t predict it.

If you think about it, that concept makes sense, doesn’t it? Because if you could predict the future you would own the market in all of, I don’t know, a couple days.

You would know exactly what’s happening tomorrow.  And if you knew exactly what is happening tomorrow you would never have a losing trade again.

But if you’ve been trading a live account for pretty much any amount of time, you know that’s just not the case. The best you can do is work to achieve a tradable edge.  Even then, as Mark Douglas states in Trading In The Zone, the distribution of returns for your edge is completely random.

Which brings me to fund manager Jon Boorman, and the awesome chart he blogged about the other day. It’s a chart of the S&P 500 and on it he has annotated the dates that several trading gurus have tried to call a top.

Needless to say, as we’re a mere few % away from all time highs, the were all wrong.

Here’s the chart (click for larger image):

AlphaCapture1

You can read the full blog post here.

 

2 Comments

  1. Kristina February 3, 2017
  2. David John Hall March 20, 2017

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