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Wednesday, September 1, 2010

Prediction versus a Non-Linear Approach (PODCAST)

"Of course the word chaos is used in rather a vague sense by a lot of writers, but in physics it means a particular phenomenon, namely that in a nonlinear system the outcome is often indefinitely, arbitrarily sensitive to tiny changes in the initial condition." - Murray Gell-Mann

I often tell ones: "Don't predict", "prediction is impossible", "the future is unpredictable", or when asked when I think where the market is going, I respond "I don't know, and I don't care".

Then I'll turn around, and talk about the state of the economy, and what I think is probable in a given market, or even a specific sector.

I'm often asked: "Dan, aren't you contradicting yourself? Aren't you now predicting?"

No, I'm not.

And I hope to clearly quantify my thinking process in the following podcast. I hope to help ones to understand why I've been as accurate as I've been.

It's not "guessing".

It's not overconfidence.

It's not arrogance.

It's a non-linear approach and way of looking at problems.

(Podcast Included. If you're seeing this entry elsewhere and cannot play the podcast? Click this link to go to the exact podcast entry ...)

Click here to download this podcast.

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Note: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 14 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.

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