Forecasting success, however, is not guaranteed by the level of sophistication of the model. The type of model we use would, to some extent, depend on the time horizon that we are interested in, as different models are better suited to different forecast horizons. In the short run, momentum of data may be more important than longer-term structural and behavioural relationships.
We therefore see different types of forecasting strategies in the markets. For example, many traders have time horizons of a few minutes. To them tomorrow is very long term. Those needing short-term forecasts will probably use chartist or bottom-up spreadsheet techniques. These models have little basis in economic theory, and are unlikely to perform well over longer-term horizons.