Market Forecasting Secrets for Traders and Investors

Market Forecasting is the science and art of determining in advance when a market is most likely to change direction and can also include the likely duration of the anticipated move.

Market analysis is about taking current price data and applying technical analysis and/or fundamental analysis to determine what the market has already done and what it is doing now, and may or may not include market forecasts.

If Market Forecasting is included, the degree to which it is included will vary widely from analyst to analyst. The forecasting method can be as simple as anticipating the crossing of an indicator line or the reaction to the breaking of some resistance level, or as sophisticated as predicting the exact date that the market is likely to change direction (new trend direction). or the beginning/end of a trend correction).

The forecasting method involved in my price data analysis is very sophisticated and naturally proprietary. The science behind my work is heavily based on the mathematics of market cycles. Market cycles provide a roadmap for the future direction of prices and the likely culmination of a move into a new one.

There are several approaches to analyzing price data for cycle tracks. These cycles are exposed to oscillators and moving averages (indicators), tracking seasonality, and even tracking various planetary bodies and the effect it has on the earth (product and psychology).

A trader or investor can do quite a bit of market forecasting without going into the really technical stuff that I use for my clients. Here are some suggestions to help you get started in determining the trend and likely duration.

Start with the WEEKLY price chart.

Using a weekly price chart, where each price bar represents a trading week, locate the start of a new move. What that means is finding a clearly defined bottom or top from where the new direction starts.

Usually, prices tend to change direction at Fibonacci points in time. For example, look for a possible turn 3 bars later, then 5 bars later, 8, and so on. If you are not familiar with Fibonacci, there is a lot written on this subject.

Note that not only can you do this for each clearly defined upper or lower swing, but they will overlap. For example, you might notice that a given week is 8 weeks away from a previous top/bottom, and also 3 weeks away from the most recent top/bottom.

Never expect exact counts every time. If you count 55 weeks from a previous high/low, it might happen at week 56. In fact, it might not happen at all. Be aware of these traps.

The key here is to get a “time frame” to focus on for a potential weekly shift. Then go to your daily chart and look for evidence of a potential trend change, such as your indicators being overbought or oversold and possibly looking to reverse. You can even apply the time counting approach to your daily chart and look for groupings within the weekly time frame you are analyzing. Clustering is when you have two or more results that point to the same time period (within a day or two) based on counts of different previous highs and lows. These are time periods that you want to see.

There are so many valuable market forecasting techniques that you can use to help you predict future changes in the market. I have included 12 powerful methods in my book Market Forecasting Secrets. By adding Market Forecasting to your chart analysis, you can be ready at the right time to plan new trades or exit existing trades. Another big advantage is that it helps reduce your risk exposure, as there is no better place to enter a trade than near the beginning of a new move.