Why Forex Forecasts Don't Always Come True
Nowadays, there are numerous websites that provide detailed forecasts for exchange rate movements, precious metals, energy prices, and so on.
It would seem that trading on the exchange couldn't be simpler: simply read the current forecast for the selected asset and open a trade in the desired direction.
Then, wait for the analyst to announce an imminent price reversal and close the trade with a profit.
But in practice, things turn out to be far less rosy: over 30% of forecasts are either forgotten or come true to a lesser extent than expected.
As a result, instead of the promised profit, traders suffer losses and accuse analysts and research firms 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 factors market factors, but also the players themselves, who have great potential.
Predicting this impact is only possible if there is publicly available information that one of the market participants will soon begin to buy or sell certain assets.
An analyst assesses the current market situation and, based on it, makes forecasts for tomorrow, but he cannot know that one of the national banks will begin actively buying up 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 weak a company's position and how high its share price, a fire or natural disaster can collapse the market at any moment.
• A common mistake – people, including analysts, are prone to mistakes and do not always accurately assess the current situation. No matter how professional an analytical agency is and how many people work in it, there is always a percentage of errors.
Should we take stock market forecasts into account?
technical analysis exclusively ?
Firstly, the percentage of accurate forecasts is much higher than those that turn out to be incorrect. Therefore, it's definitely worth taking forecasts into account.
Secondly, these forecasts are also a factor that influences the current trend. That is, if everyone is saying Bitcoin will rise in price, it will definitely rise, since not only are many people talking about it, but they are also starting to buy cryptocurrency based on general sentiment.
However, the most important thing is not only to consider forecasts, but to follow two rules:
1. Close trades promptly if the forecast turns out to be incorrect.
2. Hold a position for as long as possible if the analysts' predictions prove correct.
These two rules will help minimize potential losses while maximizing profits from successful trades.
Another important point is to constantly monitor the market and keep track of news that could change the situation unfavorably.
