What to do to Avoid Mistakes in Forecasting Oil Prices
Following up with what the most common mistakes in forecasting oil prices are, knowing what to do to avoid said mistakes can often be pretty difficult. Below are the basics on what to do to avoid these problems.
1. Question Every Assumption
It’s important to check for biases, sensitivity of forecast, interdependence and circularity of all assumptions made in the field. It’s also important to check the forecast itself if its an assumption.
2. Protect Yourself Against Herd Mentality
It’s pretty hard to break free from the herd mentality that follows such assumptions. It’s incredibly important to break away from what others say and make your own objective judgements.
3. Adopt a strategy to approach the future
To avoid falling into the pitfalls of larger forecasts, managing a scenario to make major assumptions on forecasts is a good way to avoid relying too much on others’ forecasts.
4. Take a longer-term approach to investments
Having a financial flexibility is absolutely essential to deal with the short-term differences in the market. Often, you may be able to make an accurate forecast, however, you wouldn’t know when the next forecast would come through so it’s always a good safety net to have financial flexibility.