How did the forecast model work in the previous years? Here you can see all the forecast models from 2005 to 2014 about Soybean. For every year there is a little comment to make you understand and see what usually is easy to miss. Remember, the forecast is only a little part of the trading activity, but it is a good starting point anyway. (The PFS is the Daniele Prandelli's Forecast Model - Polarity Factor System)
The 2005 does not start in the best way, where a strong up push goes against our model. But during the rest of the year, the model indicates to stay LONG until July 13, and then go SHORT until autumn, and this gave us good profits.
In 2006, the model was about half and half. But, I want to show how
following the main swings, you could still make profits in a year where
it seems that the forecast model does not work too well. The PFS Model
is up until July 12, where the market had mostly lateral swings. If you
had bought in January, and then sold on July 12, you would have taken a
little loss. Then you would have entered SHORT, and the market starts to
fall producing a nice return but bottoming a month early.
With most basic risk management, you would have been stopped out in mid-September, and if you wanted to follow the Model and wait for its Low indication, you would buy in mid-October producing an excellent profit, even though entered a bit late.
So, for 7 months, the model did not produce good profits, but in the last half of the year had one downward swing of 80 points, then when Soybean starts to push up strongly, there was another opportunity to make 90 points.
The 2007 was not an easy year for the PFS Model, but still producing
profits, and this is the real power of this model. If we see that the
Model is working against the market, we can adjust our position by using
the model to give us time indications of shorter swing turn points. When
we see that the main trend is opposite the Model, we can use the swings
timings to give us our trade indications.
In the first part of the year, the Model is on track, but then it turns down until August-September while the market continues going up, but it is from mid-August until the end of September that market begins pushing up strongly as indicated by the model.
In mid-August Soybeans was at the same level as May. If you look at the Model, you will see that there is a shorter up swing from August 28 until September 17-19. This gives us a profit of 100 points, or at least indicates to us not to stay SHORT during this period.
Then the prices will help us to take any decision, for this reason I think it is fundamental to work with the prices too, because they permit us to not stay against the trend when the Forecast Model is wrong. After 2 years not so easy about the forecast, we arrive at the last 7 years where all has gone well.
The 2008 model was perfect, and there are no words needed to explain.
Also in this year, the general forecast was right, with a High in
June and then a decline into the end of the year with a rally and then a
The general up trend for the year is evident. The only problem is in January, where the market begins with a decline. At the end of the year the profits are great, but if you bought on the first day of January, you waited 7 months to be profitable. For this reason I prefer to follow the trend using my key prices.
This year the Model also worked very well. After the sideways phase of the first 6 months, the last half of the year gave us big profits, above all with the fall in September.
And so, we arrive to the 2012. In this case, the Model also worked
very well, with a general up trend until July. Then the model begins a
descent until October, and then up again through the end of the year.
Soybeans remain up until September the 4th, with a lateral roof after
the High in July. Then it goes down following the path forecast by the
PFS, but the Low is in November and not in October. Even if the forecast
missed the Low for one month, I think that generally it was very good.
The PFS forecast also the last descent of the year, with a negative
second half of December.
When I was writing the 2013 Bulletin, it was in 2012, October the 17th, and I said:
At the moment I’m waiting to enter LONG following the PFS model.
I have a key price at 1510 points, and I will be LONG if Soybeans move
above this level, with a Stop just under it.
In 2012, October the 16th, (yesterday) the market went above this level with just one 5 minute bar, making a High at 1514.75, and then it returned under my key price of 1510. Of course, this is not a movement that confirms a consolidation above the key price, so I remain FLAT, awaiting a confirmation above my key price.
This is what I mean by using the key prices to trade my model. I’m waiting to enter LONG, but if market starts to go down, I will not be caught against the trend, so that I don’t lose money if my Model is wrong. And if the market continues down, I may be able to buy Soybeans at even lower prices also defined by my Key prices, for example at 1482 or 1420 if the market reaches these values. These can be useful mid-term prices for you to use until the end of the year.
I have inserted this part also to make you understand the importance of how to use the key prices, waiting for confirmations.
Hironically, the 2013 Forecast has not been very good, but we were able to make very good profits. Soon, I will post all the updates I sent about how to trade Soybean during 2013.
Just a great year for the forecast...
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