Login to your account

Lost your password?

The correction dilemma: Understand it, or be destroyed by it

The stock market is, perhaps above all other things, unpredictable. That doesn’t mean, however, that it is entirely random. As a self-directed investor, you have probably learned, over time, how to read its moods, and that, in turn, can increase your confidence as an investor. Unfortunately, any sense of security this gives you is almost certainly an illusion.

Despite what technical analysts (also called “chartists”) may tell you, knowing the stock market’s mood (terror, euphoria, frustration, ambivalence, etc.,) doesn’t advance your ability to make money in the market. Even if you understand how and why the market behaves differently in different situations, even if you know how long given conditions generally last, even if you know (just to end the list) every single thing that has ever happened on the stock market, all of this remains 100% non-predictive.

In order to predict the very next big swing that the market will make, (let’s call this a market “event”) you would need an algorithm complex enough to predict the potentially irrational behavior of every individual who will or might make a trade, or do any of 100 other things that might affect the market, and good luck with that. No algorithm can predict the behavior of even one individual — irrational or otherwise.

Julian Close

Julian Close became a stockbroker in 1995. In his 20 years of market experience, he has seen all market conditions and written about every aspect of investing. Julian has also written extensively on corporate best practices and even written reports for the United Nations. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.