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Hi its Peter here today and I want to talk to you about why the
markets
are so difficult to predict. Now
from time to time I get people who contact me and they say things like that
they heard some guru on Bloomberg or Robert Prechter
say this about the market this is what's gonna happen to the Euro
all that sort of stuff I don't pay any attention to that sort of stuff
that's what I call the entertainment business
there was a famous speculator back in the seventies called Joseph Granville
and what he used to say was that what everybody knows
is not worth knowing. Wow you can see the tide is coming in here and how
nice it is here today
what everybody knows is not worth knowing
and you know because the market prices all that information
in and if every trader knows it then there is no edge
so
let's go back to the question why the markets are so difficult to predict
well let's let's use a soccer match as an analogy
now most people vastly overestimate their ability
to predict the outcome of things of sporting events like soccer matches
and you don't believe that just ask a *** about how many people
make money betting on soccer matches am now I know there's an argument to be
made
that the bookies price in the form and offset the form with the odds
but the market does the same thing. It prices in
all the known information and so the price at any one time between the Bulls
and the Bears
is fairly priced in
let's take another example of a soccer match. on a soccer match you've got very
defined parameters
you've got eleven players on each side you've got strict rules that they have to
follow
they have a referee to make sure
the rules are followed and roughly
the players are very similar in size to each other
lets bring that to the markets, price action is the ball
on on one side you have the bulls on on your side you have the Bears
and instead of having eleven players on each team
you literally got at this stage millions of traders
out there all looking at the same charts all looking at the same price action
the players aren't all the same size you've got guys in banks who talk in terms
of yards
A yard is a billion and so they're like big elephants on the pitch
and then you've got all these retail traders who are like a flea size on
the pitch
and they are there is thousands You've got no rules
about what can move the ball
so for example the Greek Finance Minister can come
come out and say something out the of the blue and the ball this gets kicked up to one
end oft the pitch
all of a sudden with no advance notification there are no white lines
you have no time frames the markets open 24 hours during the week
so if a football match is so difficult to predict with those very fixed parameters
then why would the market
with much more chaotic parameters and
much more complexity be any easier to predict
just consider that. So for those of you who have a
I have to move the work with water, I dont want to get my feet wet here
you have a more technical interest in the markets
in terms of what moves it most of the time its what's called a random
walk
with levy flight characteristics
look up on Google if you don't know what
that is
are what what makes up trading so difficult
at times, when the markets trending you could say though
its a random walk with drift
okay so hope you enjoyed this video and remember
never give up see in the next video