Market forecasting is the science and art of determining in advance when a market is likely to change direction and may also include the likely duration of the expected movement.
Market analysis is about obtaining current price data and applying technical analysis and / or fundamental analysis to determine what the market has already done and what it is doing now, and may or may not include market forecasting.
If you turn on market forecasting, the degree of its inclusion will vary greatly depending on the analyst. The forecasting method can be as simple as predicting the crossing of an indicator line or a response to a breakout of some level of resistance, or difficult to predict the date when the market is likely to change direction (new trend direction or start / end of trend correction).
The method of forecasting involved in my analysis of price data is very complex and, of course, my own. The science that underlies my work is heavily based on the mathematics of market cycles. Market cycles provide a roadmap for the future price direction and the likely culmination of one transition to a new one.
There are different approaches to analyzing data on cycle footprint prices. These cycles are exposed to an oscillator and a moving average (indicator), track seasonality and even control the various planetary bodies and the impact it has on the earth (products and psychology).
A trader or investor can make quite a few market forecasts without delving into the truly technical aspects that I use for my clients. Here are some suggestions to help you start determining the trend and the likely duration.
Start with a weekly price chart.
Using a weekly price chart where each price represents one trading week, find the start of a new movement. This means finding a clearly delineated swing at the bottom or top where the new direction begins.
Usually prices tend to change direction at the time of Fibonacci. For example, look for a possible move 3 bars later, then 5 bars later than 8 and so on. If you are unfamiliar with Fibonacci, a lot has been written on the subject.
Keep in mind that you can do this not only for each clearly delineated swing at the top or bottom, but also overlap them. For example, you may note that a specific week is 8 weeks from the previous top / bottom as well as 3 weeks from the last top / bottom.
Never expect accurate calculations all the time. If you subtract 55 weeks from the previous top / bottom, it may be possible at the 56th week. In fact, it is possible that this will not happen at all. Consider these pitfalls.
The key point is to get a “period of time” on which to focus with a possible weekly rotation. Then refer to the daily chart and look for evidence of a possible change in trend, such as overbought or overbought indicators and possibly the reverse. You can even apply a timing approach to your daily schedule and look for clustering in the weekly time period that you are analyzing. Clustering is when you have two or more results that point to the same time period (for a day or two) based on counting from different previous peaks and bottoms. These are the time periods you want to see.
There are so many valuable market forecasting techniques that you can use to predict future market turns. I have included 12 powerful techniques in my book “Secrets of Market Forecasting”. By adding a market forecast to the chart analysis, you can be ready at the right time to either plan new trades or exit existing trades. Another big bonus is that it helps reduce risk as there is no better place to trade than at the very beginning of a new move.