I wonder if Technical Analysis is a reliable tool to depend on for long term forecasting?
Can we really use technical analysis to make long-term forecasts of market? – I am probably preaching to the converted here, but I believe technical analysis is a good way of interpreting short-term market moves, and identifying probabilities of direction in the short-term, I am not necessarily convinced it is reliable as a long-term forecasting tool. – But I hope some of you can convince me otherwise.
I would start with the hypothesis: Is there any method that can be used for ‘reliable’ long-term forecasting? – I think there are just too many variables which hinder ‘reliable’ long-term forecasting, though we can make general long-term forecasts, but they are still probability events at best.
I’ll give you a simple analogy. – Without knowing very much about soccer I can get all the stats of previous performance over the past 100 years of International soccer countries and tell you that out of 200 soccer countries with a high degree of probability which ones will probably have a good chance of winnig the Soccer World cup in 10 years time. – E.g. there is a good chance it will be perhaps Brazil or Argentina or Germany, Italy or Spain. that does not mean I will be right, but it is highly likely I will be close. Nearer the time my forecasting maybe more accurate, I may be able to hevily discount one or two of those countries and add some other countries.
Or fundamentally without studying performance stats but knowing a lot about soccer I could probably come to similar conclusion.
Simply put……..T/A has the same potential whatever timeframe you choose to use. Its all down to pattern recognition and some subjectivity, but ultimately the same analysis applies. If you observed charts without the time reference there should be no difference in outlook!
What’s your long term? 1 year or 5 year.
Agree with neil
“In the long run, we are all dead,” John Maynard Keynes
Charts are transparent to the timeframe. But I think to keep a long or short long term position you have to work both with fundamental and technical data
I am a Professional Technical Analyst. – I do private commissioned work for individuals at Hedge funds and banks, involving in depth analysis and co-ordination with the fundamental environment. – the only reason I state this is to establish some credibility rather than for publicity or marketing purposes.
I do not share peoples opinion that Tech Analysis is a good long-term forecasting tool, but then neither is Fundamental Analysis, I happen to believe that there is no reliable method for long-term forecasting, nor is there any real need for it. – To use analogies, I don’t care whether it rains or is sunny 5 years from now. – I do believe that Technical Analysis is a fantastic tool for establishing exactly what the current and immediate environment is, and one can use this to help try and establish good risk/reward trades which hopefully will bring their rewards tomorrow, next week or next month, whatever your time-frame is.
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