Forecast Accuracy


Most people believe forecasting specific pricing trends, on a daytoday basis, for the next 90 days is impossible. After all… you have heard and may well believe that the market is purely a “random walk”. When it comes to exogenous events, there is little doubt that almost by definition, these events which can skew the market or a security higher or lower, occur randomly. But… and this is important to understand… the vast majority of pricing trends are far from random and can be very accurately predicted if the proper quantitative analysis is performed on a sufficient amount of historical data.
With our proprietary software algorithms, it is certainly possible to perform accurate forecasts that are highly credible and very actionable; and do so consistently. To understand the concept behind our forecasting algorithms, we have written a document entitled, “The Math and the Theory Behind the CycleIntelligence Forecasts”, that is a very short but informative overview of how our forecasts are constructed. You are encouraged to read the article if you want to understand some of the math and science behind our app.
The concept is simple to grasp but the successful execution of the math to achieve the desired results has eluded mathematicians and scientists for centuries. Buried within historical price data, are virtually unrecognizable repeating pricing patterns. Some of these patterns (we call them “cycles”) repeat with a consistency that cannot be seen with the human eye. For example, we may find that every 82.03 days, the price of a certain ticker moves up 1.05% and that movement can be found to occur over 90% of the time throughout that ticker’s pricing history. This “periodicity” is one of the key elements that our algorithms use to identify these predictive phenomena. After all, if a specific pricing event has repeatedly occurred 90% or more of the time in the past, the odds are very high this event will continue to occur into the future.
But, just finding those cycles that repeat is not nearly enough. Anomalies occur in the data that must be filtered out, such as: noise, which are random movements that occur with a high degree of periodicity but have no discernible predictiveness; exogenous events, which are oneoff events that skew the pricing trend abruptly higher or lower; embedded trends that are a function of the overall market and not particularly tied to the specific security; instability of cycles where the cycles tend to appear for a while and then disappear, only to appear again later; and a host of other anomalies that are removed from the data before a final set of cycles is identified.
Once the frequency and amplitude of each timecycle is defined, each one must be tested to determine its degree of predictiveness. The quantitative analysis must find only those cycles that are mathematically predictive.
After starting with many millions of cycles, the analysis, refinement and filtering algorithms reduce this universe of ‘candidate’ cycles to a handful of cycles which, when combined together, prove to be amazingly predictive and absolutely tradable.
How To Read TimeCycle Forecasts
Our timecycle forecasts are 90day projections of likely pricing trends and movements of any tradable security. Each forecast has the following:
Each of these elements of the timecycle forecast is noted on the chart, below:
How To Use TimeCycle Forecasts
CycleIntelligence is the world’s most advanced timecycle forecasting application. The Forecasting App was developed to help identify special situations that can give traders an edge over other traders who rely on only fundamental and technical tools. The algorithms take a traditional approach to finding cycles and use a groundbreaking technology to determine which of the cycles are the most prevalent and predictive. The final output gives the user an incredibly valuable, 90day forecast of both trend and price which can be used to maximize profit, adjust risk, and help to eliminate bad trades.
The CycleIntelligence Forecasting App is not meant to be a standalone tool nor does it replace the fundamental and technical tools you already use. Our technology was developed to enhance the process you currently use to make your trading more effective and profitable. The following are recommendations on how to maximize your use of the CycleIntelligence Forecasting App:
In summary, the best way to use this tool is to take your time and look at the market and your securities of interest from many different perspectives by incorporating several timecycle forecasts with your current trading/investment strategies. The most effective trades are those in which all of the tools that a trader uses, support the trade. Better trades = more profit + less risk. The CycleIntelligence Forecasting App is integral for traders who want an edge and have the patience to wait for the right situation.
How Accurate are the TimeCycle Forecasts
It is important to understand that forecasting the future is a science but it is not a perfect science. Think of it this way… Let’s assume you trade oil/gas futures and it is hurricane season. A large tropical depression is organizing halfway between the US and Africa. The tracking models show a 40% probability that the storm will go through the Gulf of Mexico oil/gas production region. The storm is approximately 10 days out to sea. Do you see the 40% projection and bet your or your client’s money that oil/gas will spike higher? Probably not… Why? The model shows a 60% probability that the storm will turn north and miss the US entirely. Is the risk too high to place the trade now, when the storm is so far out and not yet fully organized? Probably so.
So, what do you do? Do you stop looking at the forecasts each day or do you just assume the first forecast was all that was needed to make a decision? You probably keep looking at the updates as quickly as they are available from the Hurricane Tracking Center. At some point, the size of the storm and the track of the storm are sufficiently definable for you to make a trading decision. But, you do not trade just on the likely movement and size of the storm alone. No… you take into account the oil/gas demand, inventories and supply of product from sources other than the Gulf among many other considerations. There are likely many contributing factors that you will consider in addition to the forecast track of the hurricane.
This is not overly dissimilar from how you should ‘read’ the timecycle forecasts. We recommend that you run the forecasts often (at least weekly) and consider the pricing ‘track’ along with all other pertinent information before making a final trading decision. Much like hurricane forecasts… our timecycle forecasts are not written in stone and can change over time. We believe that using our timecycle forecasts will significantly improve your win/loss ratio, but if you blindly follow these forecasts without due consideration to other pertinent factors, there will be times when the ‘storm’ changes course at the last moment.
As with all accuracy claims, past performance does not guarantee future results; and, your results may vary considerably from the results of our testing, observations and trading strategies. Interpretation of the results can also be greatly affected by the specific type of trading performed. For example longer term trading strategies could draw a totally different conclusion, regarding the accuracy of the results, than a daytrading strategy.
When reviewing the "Performance Accuracy Observations", below, we use the following qualitative and quantitative criteria:
Below are the opinions of our inhouse traders regarding the statistical accuracy and reliability of our timecycle forecasts. As mentioned above, your results could vary considerably based on your investment and trading methodology:

