| SEP 1983
To Forecast or To Follow by JESSE H. THOMPSON/Technical Analysis staff writer
To Forecast or To Follow by JESSE H. THOMPSON/Technical Analysis staff writer Browsing the ads of Barron's Financial Weekly or Commodities magazine can be mesmerizing. Financial gurus, ""new discoveries"" and ""wonder"" systems abound. Too much skepticism might be unwise, since new discoveries are in fact made and old knowledge rediscovered all the time. But it's doubtful given the velocity at which they are currently streaming forth, that all these discoveries are as valuable as they claim. Nevertheless, the good is always there in the shadows of the bold print. So, the task becomes to separate the wheat from the tares. The task is best begun by attempting to differentiate between the underlying concepts, and then gravitating toward one or another that by its own virtue appears to be practical and based on sound reasoning. I would venture to say that the philosophy or reasoning underlying a given method of implementing an investment can be classified into one of two categories: the school of forecasting and the school of trend following. Forecasting we will define as placing a primary emphasis on predetermining the particular price level that a given market will reach, or how long the move in force will last. The forecaster asks the question, ""What is the market going to do?"" Trend following is similar in nature because it too is a type of forecasting, but instead of projected time or price, the focus is on current activity and direction. We will define trend following as measuring the current trend(s) of a given market, and then depending on the Law of Inertia or Momentum to enhance the probability that a given trend will continue. The trend follower asks the question, ""What is the market doing?""
by Jesse H. Thompson
Technical Analysis of STOCKS & COMMODITIES
The Traders’ Magazine since 1982
has had over 1,226,237 subscribers from 174 different countries.
37,000 Page Traders’ Archive for $89.99
To continue reading, sign-up for trial access to Traders.com and the S&C Archive — 37,000 pages of trading ideas!
After verifying your email address, you will have limited access to the S&C Archive, as well as access to a Digital Edition of S&C, and access to Traders.com Advantage and Working Money for 30 days.
Not a subscriber to Technical Analysis of
STOCKS & COMMODITIES magazine?
Click
here to subscribe, or request
a trial subscription.
Log-in now to view articles from the S&C Archive.
Your Subscriber ID is located at the top of your magazine label, highlighted here in red.
Your last name can be found on the second line, highlighted here in blue.
*If you have a company name on the label, that can also be used. It will appear below your name on the label.
If you do not have a Subscriber ID on your label, you can find it on your statement or renewal form.
For help locating your Subscriber ID number, please call us at 1-800-832-4642 or send an email to Survey@Traders.com. If sending an email, please include your name and mailing address.