Trading Vs. Forecasting: What’s The Difference? by Tyler Yell, CMT
Trading is about recognizing present opportunities where the risk-to-reward is favorable. Forecasting, on the other hand, is outcome dependent. Find out how you can use both and take advantage of those opportunities.
Most of us are conditioned to make all our trading decisions based on what we see on the hard right side of a chart. When you look at a chart, price movement that occurred in the past may look like it had only one likely outcome. But when you look at a chart in real time, you don’t know what the outcome will be. There could have been multiple scenarios, and credible people will argue for price to move in completely different paths from a specific point.
Price charts and potential outcomes often play cruel tricks on the brain. Trading, on the surface, is similar to a casino in that it informs you of the prize of a low-probability outcome while the quantitative edge that the casino holds is purposely hidden from you...