Learn share market prediction techniques? Part 1

Can market movements really be predicted? Many people believe otherwise. There’s a long held perception that markets are completely random. So, I intend to use some simple examples to put this thinking to the test.

Also, let me say, anyone can learn share market prediction techniques to profit from the share market.

Seeing how the market really works for the first time was a complete mind shift for me. The perception I had held that markets are completely random was quashed the moment I began to acquire the knowledge and understand how the share market really works.

Let me say, once you are educated in the market, how you view it will change forever, and in my opinion, for the better.

You may have heard about the ‘random walk’ theory, which suggests that the market is completely random; that past movements in price cannot be used to predict future movements. Even today, this subject is still hotly debated, despite the advances in technology that provide access to an incredible amount of information and courses available through Wealth Within Institute.

To understand what’s really going on, the saying ‘seeing is believing’ couldn’t be more true. The bottom line is, you must acquire the knowledge before you can give a qualified opinion. And, there’s so much for you to gain personally in finding out.

At least ten years ago, I recall attending a seminar on the subject of company fundamentals. I held a conversation with an older gentleman about the market and various stocks. He declared that he was a staunch fundamentalist, and seemed very conservative; from his neatly trimmed hair, which was thinning and grey, to his V-necked sweater and pressed faun trousers.

I had been studying the market for many years and mentioned my experience in using technical analysis to make decisions about shares to buy and sell. We began sharing thoughts about trading and investing, and after ten minutes I drew on a napkin the shape of the historical price chart of BHP Billiton, including all major moves from low to high to low. But before I revealed my sketch, I posed the question. I smiled as I said “What if the frequency with which BHP rises from low to high to low, and so on, was predictable?”

He was quite adamant that “it wasn’t possible to predict share prices, if it was everyone would be doing it.” The way he spoke aimed to conclude this part of the conversation. Actually, I was half expecting this response. I then revealed the napkin and shared with him how I’d measured all of the major lows and they occurred on average around every five years.

He looked a little taken aback. I don’t believe that he had ever seen the whole history of BHP, let alone considered the price data in this way. I can’t imagine investing for 30 years and never taking the time to learn technical analysis given what it reveals. His beliefs about technical analysis prevented him from seeing what actually occurs. He may even have viewed this as a ‘dark art’.

As I handed him my business card, I suggested that he learn share market prediction techniques by finding out more about technical analysis and see how this could build on what he already knew about the companies he was holding in his portfolio. With this information he could work out when the better times to buy and sell were likely to occur. He then shared with me some areas of interest around company financials, which I really appreciated.

My research into the share market is predominantly centred around the application of technical analysis; the importance of combining Price, Pattern, and Time to determine the way anything that has a price history is likely to unfold in the future, based on the past. My inspiration to learn the ‘art’ came from famous traders such as W.D Gann, Charles Dow’s phases of the market, Ray Merriman’s market cycles, and my boss, Chief Analyst, Dale Gillham.

If you would like to hear Dale’s current thoughts on BHP click here to listen to his latest podcast TWP 625.

In my next post, I show you an example of how it’s possible to use history to predict the future.

Janine Cox
Senior Analyst
Wealth Within