Forecasting Financial Markets: The Psychology of Successful Investing

Forecasting Financial Markets: The Psychology of Successful Investing

Tony Plummer

Language: English

Pages: 384

ISBN: 074945637X

Format: PDF / Kindle (mobi) / ePub


Forecasting Financial Markets provides a compelling insight into the psychology of trading behavior and shows how "following the herd" can have disastrous results. It demonstrates how one's ability to make money in the world's financial markets depends critically on an ability to make decisions independently of the crowd.
 
Tony Plummer details the three dimensions essential to achieve successful trading, including an ability to understand the forces at work in logical terms, recognize (and neutralize) any emotional responses to market fluctuations, and design an investment process or trading system that generates objective "buy" or "sell" signals.
 
Taking the author's latest research into account, this book provides an in-depth assessment of the phenomenon of cycles, patterns of economic and financial activity, and how to use cycles as a forecasting tool.  It includes Plummer's forecasts for when the global economy will emerge from its current downturn.

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values (and a lot more information besides) are already reflected in the prices. To paraphrase Oscar Wilde’s view of the cynic, a technical analyst therefore knows the price of everything and the value of nothing. This implies that financial markets will, in fact, always be trying to anticipate the future and that, therefore, changes in financial market prices precede changes in fundamental conditions. In many cases, it should be possible to use price behaviour to forecast fundamentals, rather

objectives of their own, even if the individual members do not specifically recognize them as such. The second is that crowds respond very quickly and simply to leadership. It is an important feature of financial markets that prices play a crucial part in both of these aspects of crowd behaviour. First, it is the prime objective of the successful crowd to continue to move security prices in its own favour; second, the leadership role is partly provided by movements in prices themselves. Let us

lower-level oscillations are triggered by the highest-level oscillation and because the highest-level oscillation is constructed from the effects of all the lower-level oscillations; ᔡ the patterns traced out by shock waves are reflected in the pattern registered by life cycles. CONCLUSION Let us now summarize the conclusions of this chapter by redrawing Figure 8.1 to include the greater detail that we have since uncovered (see Figure 8.10). The top part of the diagram again consists of two

evolution. The very real problem, however, is that we do not really know where such insight (or intuition) comes from. It is one thing to collect pertinent facts, but it is yet another thing to claim that the critical insight based on those facts was purely the result of analytical and analogical reasoning. Or, to put the same thing another way, we can create the right quantitative conditions for insights, but the essential ingredient of putting it all together and ‘seeing’ a different

‘oversold’ reading occurs in the momentum indicator, we can estimate that the absolute low might occur approximately 42 weeks (a quarter of the 3.25-year cycle) later. As a corollary, the time elapse between the point when a market becomes ‘oversold’ (or ‘overbought’) and the point where a reversal in the absolute price level occurs can be used to estimate a possible periodicity for a new cycle. All that needs to be done is to multiply the time elapse by four. Finally, a distinct warning about

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