Why Forex forecasts don't always come true
At the moment, there are a lot of sites that provide detailed forecasts on the movement of exchange rates, prices for precious metals, energy resources, etc.
It would seem that now there is nothing easier than trading on the stock exchange; just read the current forecast for the selected asset and open a deal in the right direction.
And then wait for the analyst’s message about an imminent price reversal and close the deal with a profit.
But in practice, everything turns out to be completely not so rosy; more than 30% of forecasts are not forgotten or do not come true to the extent expected.
As a result, instead of the promised profit, the trader suffers losses and accuses analysts and analytical companies of some kind of conspiracy against ordinary market players.
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Main reasons
• Market makers game – often the price is influenced not only by visible market factors, but also the players themselves, who have great potential.
It is possible to predict this impact only if there is publicly available information that one of the market participants will soon begin to buy or sell certain assets.
The analyst assesses the current situation on the market and, based on it, makes forecasts for tomorrow, but he cannot know that one of the national banks will begin to actively buy a certain currency tomorrow.
• Unplanned news – no one plans typhoons, hurricanes or epidemics.
It is unscheduled news that ruins even the most accurate forecasts. No matter how strong a company’s position is and how high the price of its shares is, a fire or natural disaster can collapse the market at any moment.
• A common mistake – people, including analysts, tend to make mistakes and do not always accurately assess the current situation. No matter how professional the analytical agency is and no matter how many people work in it, the percentage of errors is always present.
Do you need to take stock market forecasts into account?
The question naturally arises: should forecasts be taken into account if they are so often not confirmed? Is it perhaps better to simply trade on news or even use only technical analysis ?
Firstly, the percentage of true predictions is much higher than those that were not confirmed.
Therefore, it is definitely worth taking the forecasts into account. And secondly, these forecasts are also a certain factor that influences the existing trend. That is, if everyone says that Bitcoin will rise in price, it will definitely rise in price, since in addition to conversations, many also begin to buy cryptocurrency under the influence of general sentiments.
With all this, the most important thing is not only to take into account forecasts, but to follow two rules:
1. Close transactions on time if the forecast is not confirmed.
2. Hold the position for as long as possible - if the analysts’ words turned out to be true.
These two rules will reduce potential losses to a minimum, while at the same time maximizing profits from successful trades.
Another important point is constant monitoring of the market, monitoring news that may change the situation in a direction that is not favorable for you.