Forecasting the Stock Market

Every day I see in the financial section of newspapers how to forecast what the market will do in 6 months, 12 months, several years. "Ten stocks that will double in the next 6 months." Right! I have trouble trying to forecast what it will do tomorrow. Do not trust any who claims he knows what the future will be for the market.

Of course, your broker will send you gobs of slick material about various companies that predict they will double or triple in the next 12 months. On the New York Stock Exchange there will be about one half of one per cent (0.5%) of companies that will double this year. Are you smart enough to pick those winners? I'm not and I am considered a professional trader. And I am sure your broker isn't either. He just wants to make a commission and is probably promoting a stock his brokerage company wants to push.

Every investor wants to know the future and will send money to some "expert" who will send him news about a company that only (?) he knows. And pigs can fly. One thing about the market. It is almost impossible to keep a secret and everyone knows everything about other companies. As soon as some "analyst" finds a cogent fact that can influence a stock price he will share that "secret" with a few close friends. Within minutes the "secret" is known by hundreds of thousands and is immediately reflected in the price of the stock.

If you do get sucked into one of these money traps by some smooth-talking salesman or newspaper verbiage I strongly suggest you immediately plan your exit strategy. Without an exit plan you can easily lose a large amount of your "investment". This is not an investment; it is a gamble and should be treated as such. The first thought of any professional trader is 'if I am wrong how much am I willing to lose'? Maybe 2%, 5%, certainly no more than 10%. Pros understand that small losses are OK, but never take a big loss.

From 1982 to 2000 it seemed everyone was a financial genius. How many of those folks kept those big winnings from 2000? Almost none. Most lost 40% to 60% of their money. Brokers said, "Hang in there. You are in for the long haul". Unfortunately he did not tell you that Modern Portfolio Theory is based on a 40 year time line.

Yes, but understand you don't need to predict anything. Don't forecast. What you can easily learn is follow the major trend. You bought in 1982 and you sold out in 2000. The trend can be found in many ways with the simplest being posted every day in Investors Business Daily newspaper under the IBD Mutual Fund Index. When the Index price is above the 200-day moving average you own equities and when it is below you are in cash or bonds. Nothing complicated,

Don't try to forecast the market. Let the market trend tell you.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.

---

Understanding the Bulls and the Bears

If you've ever flipped on the television to CNN Financial... Read More

Enronization

Even if you don't own any of their stock or... Read More

I Love To Lose Money

Well, not really. What I mean is I don't mind... Read More

Its Better

Question: How does it get better when it gets worse?Last... Read More

Stock Analysis

I receive emails from Morningstar. This company provides statistics and... Read More

Parachute Investing

Ever jumped out of an airplane? It's OK if you... Read More

What Can Model Airplanes Teach You About Trading?

I was devastated!I just couldn't believe it. I was 10... Read More

Dividends

When is a dividend not a dividend?The latest thing "conservative"... Read More

Risk Control

Everything you invest in has risk so you want to... Read More

The Stock Trading Plan - Why You Must Have One To Trade Successfully

This is the continuing story of our two imaginary traders,... Read More

Quality Investment Information: Standing Firm In the Face of Opposition

THERE'S SOMETHING TO BE SAID FOR standing firm in the... Read More

Buying Mutual Funds

It looks like the market is ready to start up... Read More

Dont Buy Stocks based on P/E Ratio alone

I use the P/E ratio as a secondary indicator for... Read More

Paddle Your Canoe

At some time in your life you have been on... Read More

Fools Gold

The stock market has been in an up trend for... Read More

The Club

Yesterday I received my monthly issue of MONEY magazine. This... Read More

Investment Clubs

Because you don't feel too sure about which stock or... Read More

Duct Tape

Did you run out to buy that duct tape yet?... Read More

Its A Duck

If it walks like a duck, quacks like a duck... Read More

Will the Stock Market be Lower in October?

The stock market often closes a week in the middle... Read More

Trading Tips No 5: Stock Trading Curve Drawdown and Commitment

All stock trading and investing methods must deal with the... Read More

Perfect Storm

Having lived aboard a sailboat for 2 years I was... Read More

Who Knows?

The Shadow knows. Remember him? It seems a shadow has... Read More

Nest Eggs and Omelets

Do you have a nest egg? You know, a place... Read More

Investing Basics - Stocks, Mutual Funds, Real Estate & Online Investing

Have you ever thought of investing? Do you have a... Read More

Hedge Funds: the Good, the Bad, and the Ugly

Alfred Winslow Jones started hedge funds in 1949. He was... Read More

Stuff

I continually hear from economists, talking heads, other market letter... Read More

Is Your Garage Full Of Junk?

I have a 2-car garage. There are nice shelves on... Read More

When Should I Sell?

People are always asking me when should I sell my... Read More

How (NOT) to Buy Mutual Funds

When it comes to mutual funds, there is a lot... Read More

China Syndrome

There has been great condemnation recently because China has been... Read More

Emotional Involvement

I'll bet with almost anyone that has stocks or mutual... Read More

Learn to Calculate a Stock?s Pivot Point

Stocks breakout from properly formed bases everyday but many investors... Read More