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Can we forecast stock markets ?

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Foresee the stock exchange?
If there is a domain where the forecast plays a leading role, it is indeed that of the financial markets. We do not count any more the methods, the systems, the softwares, the textbooks, the reviews, the gurus, the specialists who have for ambition to predict the evolution of the stock exchange.

But for what result? With what success?

First of all let us clarify the problem.

If it were only a question of foreseeing the value of a stock-exchange security, a share, a bond, according to economic and financial criteria, we would just have to resolve a technical problem. A possibly delicate and complicated problem but which could be resolved by means of calculation or reasoning which we know how to master. But that is not the question.

It is much more complex. Why?

Because financial markets have nothing rational. Their behavior is dictated by an immense mass of participants, scattered on the five continents, which it is impossible to describe and to encircle. This crowd is made of individuals, companies, funds, institutions, sovereign states, which invest or speculate, which handles modest or immense capital, which anticipate, extrapolate, exaggerate, amplify.

This crowd integrates enormous quantities of information, of rumours, of methods, of knowledges, of faiths, decides at any time, gives immediate orders by the fastest means, evolve ceaselessly, changes opinion, contradicts itself, in a perpetual motion and continuously. It is a gregarious crowd that follows the logic of the crowds. It is also a packaged crowd manipulated by the political contexts, by the economic and financial world, by the media.

To anticipate the evolution of financial markets consists in guessing, permanently, what this crowd is going to decide in the minute that follows.

Is it possible?

Some doubt it, and many scientific studies tend to demonstrate that markets would be efficient, would move forward at random and would not thus be predictable. This is a point of view that may be debatable but whose existence consolidates the idea that an exact and really reliable forecast is probably not possible. It will be necessary to content ourself with probabilities.

In these conditions, we can understand why the usual methods of stock-exchange forecast appeal, for the main part, to the mass psychology. They use means of analysis appropriate to bring out average trends, to spot repetitive or typical behavior or anomalies.

Many methods observe the history of the quotations by means of various graphic illustrations, of calculations of oscillators, averages, derivatives. The prevailing idea is that we can foresee the future behavior by observing the habits taken in the past.

Is it reliable?

The practitioners of the diverse methods of stock-exchange technical analysis know it well, these methods can give excellent indications, often very relevant. In particular, they are unbeatable to describe the current behavior of the crowd.

They discern perfectly the critical thresholds, the supports, the resistances, the hesitations. In many cases they give very plausible, rather often right forecasts. But there cannot be any certainty there, and the errors are relatively frequent.

These methods are good guides, but we cannot really talk about reliability, and it is really necessary to be very talented to get the quintessence.

Is there an alternative way?

We do not propose an alternative strictly speaking, but a additional approach, based on a different principle. Instead of trying an extrapolation from the history of the prices, we seek to discern the instinctive orientations of the crowd of operators, its tendencies of the moment. To do that we use traditional psychological indicators, which crossed centuries and civilizations, and which are still topical.

For this we are going to venture into an a little underestimated, sometimes criticized psychological domain, which needs knowledge, caution, and a lot of method.

The very rationalist readers and those who are little informed about the real astrology, can be confused. This is understandable when we see the vagueness, even the charlatanism to which this discipline can sometimes lend itself. But we shall see that this technique provides stock-exchange forecasts of a surprising realism.

We shall try, on this site, to show objectively, in a not esoteric way, without astrologer's gibberish, immediately understandable for each, to which results surprising of truthfulness this technique can lead us.

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