Why is this the best system for traders?
In order to demonstrate the superiority of this system over other solutions, we compare it to some of the methodologies, most often used by market participants. Our focus is from intraday trading to a maximum time-period of four weeks.
Some of those popular methodologies:
- Dow theory
- Classical Market patterns
- Elliot Wave theory
- Other “artificial” patterns
- “T” theory
- Box theory
- Economic theory/ models
- Newsletters
- Popular indicators
- Fibonacci series
- Fundamental analysis
Dow theory:
This theory was created during a period, when Day-Trading did not really exist.
It is still valid, and robust theory. But the usefulness of it is questioned at a time, when more and more trading occur intraday, and within a very short period of time, say 4 weeks.
The Dow theory is not really usable to predict market movements within the 1 Day – 4 Weeks period, which is getting more and more important every year as the market becomes more trading focused and less investment focused. Its predictive capability is negligible for most of Today’s traders, it is only after the events occurred, when we can make the conclusion that a specific cycle is over.
Many newer derivative applications of the Dow theory, that uses computer algorithm to identify cycle status, can be better, but those are mostly longer-term predictors.
Classical Market patterns:
Just to mention a few of these, used by traders: Triangles, Flags / pennants, Head & Shoulder, …
Tight Range, Cup and handle…
Some of the patterns are fine to give us measures about potential market moves. None of the patterns
can give us good timing, as the predictability of the next move can be X amount of time away or 2*X amount of time away or even more.
So far never saw publicly available statistics about any pattern (Lets select Head & Shoulders) on 5, 10, 15, 30, 60 Minutes, daily, weekly, monthly time frames, during Bull market Uplegs, Downlegs, Ranges, Bear market Uplegs, Downlegs, Ranges…So what do you actually trading using these patterns than? The common public belief?
Elliot Wave theory:
This popular theory is good in a way that it might give us a clue sometimes about the potential size of the move. It try to be supportive on the timing front, but we believe, timing is not the strength of the Elliot wave theory. A wave length in time can also widely vary.
Also very often to recognize the first or second wave while they occur might be difficult and can’t be accomplished by most of the users.
Those, who able to play part of the third wave the fourth and fifth wave might be playing the market much less than 50% of the time so they are not taking advantage of a lot of potential possibilities on their selected time-frame.
If we ask the question, what is the percentage of the Elliotticians, who always correctly identify the Wave 1 and Wave 2, than the results would probably be small.
It is also interesting that while technicians agree that plying the stock market is a probability game, probability is almost missing from the dictionary of Elliotticians. And the reason is that they don't have it.
The Elliot Wave Theory is better to document market movements after they occur, then predict them in advance, compared to predictionwizard for the time period in question (1 Day – to four weeks).
Other “artificial” patterns:
The variety of this is huge, limited only by your imagination.
To easily grasp this we present one example:
Let’s say you select Volume, Volatility, Price movement in the previous X days, and the relative position of price levels compared to a Major average (Say the Daily SMA200 or Simple moving average)
Then you create a series of conditions.
You run a test, and collect statistics about the probability of the next move of the market.
After the tests you say, that the market has 75% probability that it will close Down the next day, or 80% probability that it will close down sometimes during the next five days.
There are many issues, questions that arise, and make it very difficult to profit from the prediction.
Some of these:
Lets say the next morning the market opens down 2% after you ran your analysis. Is it a short or a not?
If the market opens way below a specific level, you do not have any information that is probably going to go down more, and after you opened a short it will probably bring profit for you, or it is going up all day, and lose you money, if opened short, according to prediction.
These kind of predictions never give you support about the probable direction after you opened your position, and very often requires the tolerance of big movements against your positions.
The other issue with this type of prediction is that it forces you to focus on the close of the Day.
It is rare, that the market is closing at or close to minimum or maximum Daily levels, and on top of that is in the predicted direction, so by focusing on the market close very often you miss the real potentials that is in the market during the predicted period.
It is also question, whether the subjectively selected market features / properties really depict the current market situation with real predictive capability correctly or not.
Contrary to this the predictionwizard does have statistics about the potential moves of the indices after the predictions, and does not really force to close any position at any pre-specified time, only a much bigger time period, during the day, week, month, even then might have exceptions. It lets you focus on the market and optimize the profit levels to the maximum, your created strategy gives you on top of predictionwizard.
Yes predictionwizard might be a bit more difficult to learn, but the benefits are too great to neglect them.
“T” theory:
The “T” theory is a very interesting theory created by Terry Laundry. http://www.ttheory.com/
Again, this is much better for investors and players who would like to play the longer-term market movements, and would like to trade only about 2 – 6 times per year.
Terry has estimates about time period of a market move as well as the size of the move.
Predictions might easily be off Days or even weeks, though that is not a big issue for the long-term investors.
Box theory:
This is another old theory, created by the Hungarian Nicolas Darvas more than 50 years ago.
For the task to correctly predict the next market direction, it is not even comparable to predictionwizard.
This theory was great in its time, and could be used more profitably in a strong trending market.
In the current US market the range period have a higher importance, and they take longer, and the success
rate of the breakout player is not as it was in the old fifties.
The timing of this methodology is not precise, it is more focused on the prediction of the size of the next
market move.
Economic theory / models:
The economy and the stock market is very much interrelated. But that is about all we can say.
Some economic indicators have predictive capability of the economic picture of the future, but the economic
models and the stock market can diverge for a prolonged period of time, sometimes even for years.
It is like the question of the chicken and the egg. It is less like that the economy predicts the stock market,
and more like the stock market predicts the economy of the future. Very few individual economists able to
predict as precisely the economy, as the stock market does predict it, with the collective wisdom of the
participants.
So for our trading purposes, that we are focusing on, (1 Day to 4 weeks) economic models would not bring
much success.
Newsletters:
A lot of questions arise about the usefulness of news letters.
The first and most important question that often newsletters not written by experienced traders, but news writers.
There is a huge variety of coverage, and it is a daunting task to find the real value, the real jewel in the pack.
Objective statistics about the success rate of coverage, news not available.
Not many writer admitted himself / herself that in the past wrote about X or Y and it just did not work out.
Without statistical data or with data that can’t be tested and verified by you would you throw a fortune into any investment, just because a popular personality told something?
That would be ultimately your loss at a future time.
Periodic writers are pressed to write about something, that could be more or less valuable.
Their focus is not necessarily trading, and not consistently successful trading, but to feed material to the readers by a deadline.
Just ask the question how much money did you make in the past X years directly or indirectly with the help of a specific newsletter, and if you give yourself the correct answer, than it will be a good measure of how valuable the specific newsletter is for you.
Again, in a world , when average US people spend 4 – 6 hours in front of TV every day, they can very easily be manipulated in a way, they don’t even recognize, and losing strong focus and incentives to discover the details themselves.
Just by reading a hundred newsletter you will not become smarter, more knowledgeable about the markets. You might even forget those within days or weeks. But you will definitely remember the results of your own analysis and your own discoveries on the markets. Reading might be good only to get new ideas that might lead you again to new discoveries, and lasting knowledge though your own work.
There are probably thousands of newsletters out there.
Some of the top US market gurus and the correctness of their predictions continuously tracked by CXO advisory. (http://www.cxoadvisory.com/gurus/)
Now if the best of the best give you on average 48% prediction precision (As of January 29 2010), than how the other professionals would measure up? What do you think?
Popular indicators:
There are hundreds of popular indicators and probably even thousands of other less popular ones.
Some of them are better in trending markets others better in range markets.
The good thing in an indicator, that it is derived directly from market data, so there is no subjectivity in the indicator calculation, though there might be subjectivity in the interpretation.
Most of the indicators try to help market participants timing their entry / exit.
There are many charting applications, that comes with a lot of indicators.
Not many of them capable to give us detailed statistics for our trading, that is statistics within pre-specified market conditions, the time frame we are trading.
Winning probability of any indicator depend on a lot of other factors, like type of market (Bull, Bear, Up-trending, Down-trending, Range market and changes during longer period of time…)
Often newbie market participants use the trial and error way, applying one or more indicators, and it might even work for a period of time, than suddenly stop working.
Because the player did not collected all the statistics necessary to evaluate the usefulness of any indicator and its applicability during a pre-specified market condition, the final outcome might not be that rosy.
When we try to answer some indicator – related question, we get the reality.
Some of these questions:
Among the available indicators the most popular ones are better, or the least popular ones are better?
Why do we have the dour statistics, that almost 100% of market participants have access to the popular indicators, but less than 5% of them have consistent success in the market?
What is the predictive capability of a specific indicator?
All in all the most popular indicators alone probably will not make you a fortune during your lifetime.
Fibonacci series:
Fibonacci series also used to supplement decision by market participants.
It is more widely used to estimate the possible size of a movement than the timing of entry / exit.
Again we saw no tools available on the market, that would give the slightest support for the individual trader, tackling the market.
No statistics found for example that within a specific market, a specific time-frame, a specific market condition
a Fibonacci retracement / extension of 23, 32, 50..% occurred with this and that probability.
Again it is usually after the events that you can conclude what the market actually did, and not able to predict it with Fibonacci in advance.
It could be used as a guiding tool, but definitely would not rely on it exclusively as the main source for trading decisions.
Fundamental analysis:
It would probably be too strong to announce that pure fundamental analysis is dead.
After all Mr. Warren Buffet made his fortune as a great Fundamental analyst.
Someone can be extremely good at finding great companies with great potential, but the same person actually playing his bets could be completely broken, much quicker than he can wake up for the reality.
We are focusing on the market indices, and fundamental analysis of individual companies not enough for index timing prediction and not good enough to estimate the extent of the market movements, compared to other methods. Analysis of general market fundamentals can help mostly the very long-term investor.
We would like to emphasize, that all of the above methodologies has some merit and value within specific conditions.
It is the market player’s task to learn the known and unknown, or unpublished particularities of the methodologies, that might make them more valuable during specific market conditions.
That might make the difference between the newbie, the student, and the master trader of the market.
Compared to all the above methods, we think that predictionwizard has the best technology, that is currently publicly available for traders.
It is trading focused, it has very detailed timing, detailed predictive capability, and it also has support to quickly identify incorrect predictions, and many times reach a profit level even if a specific prediction is incorrect, by reversing positions early enough.
At the same time we must be fair and also mention that predictionwizard is not a pure gold mine with perfect predictions. It is better than the others, but could provide the best results, if used in conjunction with other methodologies. Some of the best tools that can extend the capabilities of predictionwizard are the tools with high success rate of predicting the size of market movements during different market conditions.
Enjoy your journey to higher success levels in trading with the help of predictionwizard.