The world at large is undergoing a major transition and this is reflected in unprecedented market volatility which is causing many a trader difficulty with their trading systems as their trading emotions get the better of them.
Many traders lack the flexibility to go with the flow of the market, continually looking for fixed reference points upon which to base their opinions. This attitude flies in the face of good trading psychology. In a market that is changing its character quickly longer term forecasting for investment portfolios has become a big challenge, as many a pension fund manager would tell you.
Longer term forecasts in major paradigm shifts are impossible
The problem with forecasting larger degree cycles is that it is impossible to know what the future holds, as invariably the conditions for each cycle change vary from the conditions of cycle previous changes. Major cycle changes always coincide with major paradigm shifts and this where we are right now. Market analysts and many traders make our forecasts based on the evaluation of past history and past market co-relations.
It is a fallacy to believe that the future equals the past and most co-relations do not stand up in the long run, if you examine them closely. To use either as a valid forecasting tool is rather like throwing a dice.
Your best call is not to anticipate future events
The future by definition is unknown. It is the field of infinite possibilities as long as it remains unobserved. The very moment forecasters jump on board predicting a major collapse of the stock market, the financial system, the world governments etc. an observation is made.
Scientific research shows that a particle reacts to the observer. This process is non local. This means the moment we make a forecast about the markets particles shift in reaction to the forecast, starting a chain of reactions, however minute to begin with. One analyst forecasting a market turn will likely be followed be several others and before you know it most analysts forecast a turn based on their observation models.
Before long a shift in the market will occur. You may be familiar with the cat thought experiment by Austrian physicist Erwin Schrodinger. Before Schrodinger's cat is observed the cat is both dead and alive.
This is precisely what happens to market forecasting and any type of forecasting. Any forecast can become reality once it its observed and opined as true by a large enough number of people. Once an opinion is formed and observed the brain looks for validation of that viewpoint. This is basic neuro science.
As more analysts report a particular outlook, more traders are looking for validation of this outlook. The more negative the prognosis is the more opinionated traders get, as trading emotions and ego preservation come to the fore History is in the mating. If you don't believe me just read The Wall Street Journal, Money week, or other publications.
Trade what you see
You know when it comes to trading your opinions things get rather sticky. Since our brains are wired in such a way that our minds have thoughts, which are mostly opinions, and we believe that thoughts are a necessity for trading, when actually the opposite is true, most traders have great challenges getting out of their own way. Getting out of the ego based state requires suspending one's thoughts on what the economy, or the governments are doing and just trade what you see on the charts. Win, draw, or lose.
In my years of coaching traders I have placed great emphasis on making clients see how their opinions are not only contributing to outcomes, many of them they do not like to see, but that they are also limiting their possibilities. Trading without opinions is one of the tenets of good trading psychology.
Your trading life will flow with greater ease if you can trade from a point of view of no point of view. It makes for a calmer mind and fewer trading emtions. A calmer mind focuses better and you will have more energy too. All said and done longer term forecasting is a delusion and an ego trip.