I thought this was interesting from the Wall Street Journal:
Barron's asked a dozen experts to forecast the level of the Standard & Poor's 500-stock index at the end of 2009. Not one called for the market to go down; they all predicted gains between 5% and 38%, with a median of 13%.
Given how wide off the mark their predictions usually land, you may already be skeptical of the forecasts of Wall Street's finest Pollyannas. But their inaccuracy doesn't make your own forecasts more likely to hit the target. You should be as skeptical of your predictions as of theirs.
This story underscores research the indicates that when we trade our biases, we're generally wrong. Perhaps we can extend this lesson to acting on our interpretations of news events also. Successful fellow traders have told me that they trade more successfully when they ignore CNBC and the news, and trade only their signals instead. I've found this to be wise counsel.
