The price knows it is being predicted
Markets · reflexivity ·
- Short-term prices are hard to predict because any pattern in a market is made of people looking for patterns, so using it changes it.
- Soros called this reflexivity: the forecast is part of what it forecasts.
- It also makes a run of good predictions self-limiting, not because the market owes anyone a correction, but because success attracts capital, capital crowds the trade, and the crowd either removes the edge or unwinds it.