For Those Who Like Prediction… a Link

Apr 10, 2007: 11:18 PM CST

If you like newsletters or market predictions, a great site I discovered recently is Carl Futia’s site. Carl Futia obtained a PhD in Mathematical Economics.

He uses the Theory of Contrary Opinion and Box Theory (which he describes on his site). He frequently updates futures, including the Nasdaq and S&P.

Today, he posted price targets and support for a few major stocks, including Google (GOOG), IBM, and CME.

If you like outside opinions on price, the site is worth a look. Especially check out his warning post entitled “Should You Speculate” (his answer might surprise you).


2 Responses to “For Those Who Like Prediction… a Link”

  1. moom Says:

    From observing now all these trader blogs etc. I can see that few traders have much or any edge. They make money through money management primarily is my impression. Futia doesn’t address this. Of course I think I have an edge (and its tested statistically) I’m having a harder time with the money management side of it. The majority of my trades win but the losers lose more than the winners.

  2. Corey Says:

    True, Futia’s site only posts price targets and little else. I did like the post on “Should You Speculate” (with the answer being no!) which addresses the fact that most people lose in the markets. Some people feel they benefit from others’ work in terms of price projections or market analysis, but you are right – what matters is taking each trade that has a statistical probability of recurrence with better than 50% (chance) odds.

    Edge is not enough, however, as you address. One can have a system with an edge and still face the “risk of ruin” (losing the whole account) if position sizing is improperly addressed (ie. if one takes on too much risk per trade).

    Entry is only one side of the equation. Exit is another. Position sizing/money management is another. In fact, studies have indicated that “entry” is less important than money management factors.

    Also, in a strange sense, system profit can (often) be negatively correlated with win ratio. Even in a system that wins 90% of the time, if the 10% of losing trades are of significant magnitude, then the system will not be profitable. An example might be a range-bound fading system with no stop-losses (or lack of adherence to them). A trader might buy support and sell at resistance (and vice versa) as long as the stock is in a consolidating range or channel, but the ONE time the stock breaks out can wipe out all those profits (as stocks can gap out, break-out and run, and leave the trader paralyzed by fear and indecision… or worse, adding to a losing position as it strongly trends against him).

    The opposite is true with some trend-following systems. They may buy each and every breakout from consolidation… only to watch maybe 60% to 70% of these anticipated breakouts fail. These “failure tests” may cost them 2% each time. But the 30% to 40% of the time the stock actually breaks out, the trader may ride the trend long-term to gain 30% or more per long-term trade.

    Thank you for your comment and I hope this helps a bit.