Stop being punked by financial analysts! (Key points/cheat sheet)
Here are the key points from our video ‘Are You Being Punked by Financial Analysts?’ that you can use as a reference guide or ‘cheat sheet. The video is available on our YouTube channel and at the bottom of this article.
- You are being played for a fool by some financial Analysts. Some don’t realise they are doing it, but others do and have even built their career around it.
- Often analysts use an approach with similarities to ‘cold reading’ when providing analysis for private traders and investors. They think it’s absolutely fine and most of them do it... But it’s not!
- Some of the steps to ‘cold reading’ include being confident, gaining the subject’s cooperation, using stock phrases and giving the impression they know more. There’s also a famous technique called ‘Barnum statements’,
where vague sentences are used which can apply to anyone and any situation. (E.g. “You are on the verge of making a big decision in your life”).
- Some analysts will make their analysis sound insightful, but if you pay attention and map their predictions onto the charts, you can see they are just ‘predicting’ that anything can happen. They are hedging their bets and covering ALL situations, in a deceptive way, so they can always look like they knew what was happening.
- They use non-specific terms such as ‘short-term’ and ‘a sustained move’ but they never use specific information. This is similar to what is discussed by Philip Tetlock in the book ‘Superforecasting: The Art and Science of Prediction’. Vague language that allows them to claim they are still right, even when there is compelling evidence to show they are not (in times of cognitive dissonance).
- Other analysts just predict a huge amount of trades or investments, but the focus is always on the ones that do well, while the losers are forgotten about.
- They consistently show their inability to predict the future (as also discovered by Philip Tetlock). In reality we can only assume a price movement has a strong possibility of taking place when we have the evidence to suggest it is about to happen. This is similar to using the clues to be like Sherlock Holmes using the art of deduction, rather than Mystic Meg using a crystal ball. We still can’t predict precisely how far the price will move, only the direction it will be going initially.
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