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J M W Tadion refers to the forecasting ability as one of our most highly developed faculties. Pattern recognition skills may in fact be geared to that purpose. But anticipation in the market is likely based more on emotion than hard facts. Tadion says the majority of traders know almost nothing about what they're doing. There's much to be said for this because there is uncertainty almost everywhere you look, especially in the markets, making modeling itself difficult. Modeling is really seeing to some level of confidence, and "seeing" means "getting the idea," which we all know isn't easy, but essential.

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Nonetheless, to get information about stocks and bonds to buy or sell them intelligently, you need an indication of what the market is doing. You need a way to structure the market to acquire the right information about it. You need a way to "see" what's happening. This calls for "cookie cutter" projections, pattern formation sensors and skills. You need ideas to guide your decisions. You need concepts. I'm trying to help, here, by reading the gold market for you on an ongoing basis, as patterns appear.

The directive generally comes in the form of a theory or system of rules showing how the market works -- an explicit model that draws on market dynamics to predict where prices are headed -- up, down, or sideways -- and when you should buy and sell. The model also helps to "take the emotion out of investing" and provide some stability -- basically to let you sleep at night. For a better sense of models you might read my book.

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Because the market is so complex, good models are hard to find. We have no choice but to begin with simplified versions and suffer potential errors. Even if, like Richard Ney, you believe that the market is controlled by the floor specialists, you still need to read what the specialists are doing. They're not about to tell you.

Indicators have to get at critically important aspects of the system, otherwise they wouldn't be reasonable guessing mechanisms. You can think of them as properties of the market. To be of any value, they need to provide relevant information (relevant ideas). An aggregate of indicators may be needed to trade successfully.

But the models must also be used consistently -- they act as stabilizers, providing information that keeps us from bouncing irrationally from one emotional binge to another. According to James P O'Shaughnessy:

You can find a variety of such indicators here.

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Market indicators are simplified models (rules, laws, pointers) that draw on market properties to predict future performance, either short or long term. They also require continued updates.

The actions to be taken based on the indicators are determined by the valuation of properties on which the indicators are based. The values in their aggregate specify the condition of the market. The indicators measure the conditions and, drawing on the result, determine the nature of the trade. For example, a trend indicator measures the strength of a price trend.

Analysts generally agree that no single indicator can be relied on completely to give an accurate assessment of market direction and that, therefore, a variety of such indicators should be used in combination. This is understandable, considering that the market, like the human body, may indicate its state through multiple symptoms.

What may be less understandable, though, is that, unlike in medicine, the more popular an indicator is, the less likely it is to yield good results -- the market seems always to do what's necessary to make fools of the majority of us.

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Models