Forecasting

“Making a forecast typically implies planning under conditions of uncertainty. It suggests having prudence, wisdom and industriousness, more like the way we now use the word foresight.”

• Giving expectations in terms of general direction “Up”, “Down”, “Sideways”
• By virtue leads to a recommendation “Buy”, “Sell”, “Hold”

Predicting

“Prediction is an attempt at certainty.”

• Eg. XYZ will be at Rs.XXX by the end of 2024.
• Measuring a tangent from a chart pattern is a prediction.
• Some dub-fields of technical Analysis are focused on Prediction. Hard to quantitatively test since predictions are specific to the security on which they are applied.

• Fundamental Analysis uses valuation.
• Technical Analysis uses historical data.
• Quantitative uses Technical and Fundamental fused into quantifiable Mathematical models.

• Using evidence to support theories.
• Making decisions based on objective analysis.
• Traditionally focused on a single chart.
• Modern TA considers many inputs.
• A field of probabilities and likelihoods.

• That markets trend.
• Price is determined by the interaction of Supply and Demand
  • Change in S&D is based on human decisions. Those humans are processing information and making decisions based on fear and greed.
• Price “discounts” everything.
  • Not just the information but the interpretation of that information.

• Prices are non-random
  • TA’s expect history to repeat, or at least rhyme.
  • Patterns form in markets. People’s interpretation and reactions are based on Psychology and often repeat.
• Trends and Patterns are Fractal
  • Patterns that are evident on a monthly char will be seen on an hourly chart.